After a morning rife with pertinent data, the dollar is gaining strength.

The combination of the U.S.

Consumer Price Index (CPI) data and the U.S. December

Industrial Production and Capacity Utilization (IP) data has sent the dollar headlong into an upward spike against the euro today. The headline CPI came in at a 0.2% rise, as expected, while the core CPI (headline minus food and energy prices) came in at a 0.1% rise, below the expected 0.2% monthly increase. The most recent IP data, released shortly after the CPI data, showed a 0.6% drop in output, a slightly larger drop than the median consensus estimate of 0.5%.

The shakeout of this data could be a key predictor of inflation in the next few months. While the reports were in line with expectations, they do indicate that inflation is rising, albeit slightly. This was the third consecutive month that consumer prices increased.

Additionally today, the currency markets are eagerly awaiting the Senate confirmation hearing of Treasury Secretary-designate

Paul O'Neill

today. Rumors abounded yesterday that, despite previous

Bush

camp insistence of maintaining a strong dollar policy, O'Neill may not support a strong dollar once in position. This helped to move the dollar down against the yen

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yesterday.

According to Robin Pagnamenta, editor of

CurrencyNetwork

, a foreign exchange research publication, "the markets have been on pause the last couple of sessions," awaiting today's data as an indication of the likelihood of recession in the U.S.

Prior to the CPI report, Pagnamenta noted that today's reports could be "quite a volatile reading," which, in fact, they have not played out to be. The euro was trading most recently at $0.9343, down from yesterday's close of $0.9414.

The euro, weakened by the U.S. data, continues to lose value against the yen today. The euro/yen was most recently trading at 110.20, down slightly from 110.72 at yesterday's close.

The dollar is reversing yesterday's losses against the yen today in the wake of the morning's reports. The yen made light gains on the dollar yesterday, hitting one-week highs against the U.S. currency, as a result of concerns about the possible dollar-policy shift should O'Neill be confirmed today. The dollar was most recently trading for 117.90 yen, up from its last close Tuesday of 117.70.

The British pound has shown little net movement against the dollar today, making slight gains post-CPI announcement, but then retracing those gains. At its most recent, the pound was trading for $1.4724, up marginally from yesterday's close of $1.4716.

The Australian dollar is largely unchanged in trading against the U.S. currency today, middling at $0.5550 recently, just barely up from yesterday's close of $0.5548.

And the Canadian dollar is losing value to the U.S. currency in the wake of the CPI and IP reports. The U.S. dollar was most recently trading for C$1.5089, up from C$1.5061 at yesterday's close of trading.