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Forex Today: Dollar stays on the back foot heading into the weekend

Here is what you need to know on Friday, May 20:

The US Dollar Index registered its largest one-day drop since early March, losing more than 1% on a daily basis on Thursday. The steep decline witnessed in the US Treasury bond yields made it difficult for the greenback to find demand despite risk aversion. Markets stay relatively quiet early Friday but US stock index futures trade decisively higher, pointing to an improving market mood ahead of the weekend. The European Commission will release the Consumer Confidence data for May later in the session.

The benchmark 10-year US Treasury bond yield dropped to its lowest level in nearly a month at 2.77% on Thursday before staging a rebound. The S&P 500 Index is down more than 3% this week and remains on track to close the seventh straight week in negative territory. Investors grow increasingly concerned about the US economy going into recession with the US Federal Reserve staying on a tightening path even if consumer activity continues to weaken. 

EUR/USD took advantage of the selling pressure surrounding the dollar and climbed to its highest level in two weeks above 1.0600. The pair stays in a consolidation phase slightly below 1.0600 early Friday. Germany’s Destatis reported that the Producer Price Index (PPI) jumped to 33.5% on a yearly basis in April, compared to the market expectation of 31.5%.

GBP/USD extended its weekly rebound following Wednesday’s uninspiring performance. As of writing, the pair was posting small daily gains and trading within a touching distance of 1.2500. The data published by the UK’s Office for National Statistics showed earlier in the day that Retail Sales in April rose by 1.4%, surpassing analysts’ estimate for a decrease of 0.2%. 

USD/JPY stays below 128.00 in the European morning after having edged lower during the Asian trading hours. Japan’s Statistics Bureau announced on Friday that the National Consumer Price Index climbed to 2.5% on a yearly basis in April, beating the market forecast of 1.5% by a wide margin.

Gold gained more than 1% on Thursday and closed the day above the critical 200-day SMA. XAU/USD clings to small daily gains early Friday and trades slightly below $1,850. The 10-year US yield is holding in positive territory, limiting the pair’s upside for the time being.

Bitcoin rose 5% on Friday and seems to have steadied above the key $30,000 level on Friday. Ethereum is moving sideways in a tight range a tad above $2,000 following Thursday’s rebound.

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