Forex Today: US Dollar struggles to extend rebound as mood improves

Here is what you need to know on Wednesday, February 25:

Following the volatile action seen at the beginning of the week, the US Dollar (USD) stood resilient against its rivals on Tuesday. With the market mood improving, however, the USD started to lose its strength early Wednesday. Eurostat will publish revisions to January Harmonized Index of Consumer Prices (HICP) data later in the day. Since the US economic calendar will not feature any high-impact data releases, market focus will remain on comments from Federal Reserve (Fed) policymakers.

Wall Street's main indexes gained traction after the opening bell on Tuesday and registered strong gains. In turn, the USD Index retreated from daily peaks to end the day marginally higher. In the European morning on Wednesday, US stock index futures trade flat and the USD Index stays in the red near 97.70.

During the early trading hours of the Asian session on Wednesday, US President Donald Trump delivered his State of the Union speech. Trump noted that there is no inflation and "tremendous growth," explaining tariffs as one of the main reasons behind the economic turnaround. Trump further added that almost all trading partners want to keep the trade deals they already made despite the Supreme Court's ruling.

EUR/USD closed marginally lower on Tuesday before gaining traction on Wednesday. At the time of press, the pair was trading near 1.1800, rising more than 0.2% on the day.

After rising sharply and posting gains for the third consecutive trading day on Tuesday, boosted by growing uncertainty about the Bank of Japan's (BoJ) policy-tightening outlook, USD/JPY seems to have entered a consolidation phase at around 156.00 on Wednesday. Earlier in the day, Japan’s Deputy Chief Cabinet Secretary Masanao Ozaki said that specifics of monetary policy are to be left to the BoJ.

Gold lost more than 1% on Tuesday but managed to hold comfortably above $5,100. XAU/USD corrects higher on Wednesday and advances toward $5,200.

Earlier in the day, the data from Australia showed that annual inflation, as measured by the change in the Consumer Price Index (CPI), held steady at 3.8% in January. This print came in above the market expectation of 3.7%. AUD/USD gathers bullish momentum on Wednesday and trades at its highest level in nearly two weeks above 0.7100.

GBP/USD gains traction and trades in positive territory above 1.3500 after struggling to find direction earlier in the week.