Forex Today: Dollar rally continues as European traders return from Easter break

Here is what you need to know on Tuesday, April 19:

Rising US Treasury bond yields and the cautious market mood allowed the greenback to outperform its rivals at the start of the week. During the Asian trading hours on Tuesday, the US Dollar Index (DXY) reached its highest level since April 2020 101.02 before retreating modestly in the early European session. The US economic docket will feature Housing Starts and Building Permits data for March. Later in the day, Chicago Fed President Charles Evans will be delivering a speech as well.

While speaking at a virtual event held by the Council on Foreign Relations late Monday, St. Louis Fed President James Bullard reiterated that the Fed needs to lift the policy rate to 3.5% by the end of the year to be able to battle inflation. Bullard further added that he is in favour of starting the balance sheet reduction at an upcoming meeting. On the back of these comments, the benchmark 10-year US Treasury bond yield climbed to its highest level since December 2018 and came within a touching distance of 3%.

In the meantime, the Euro Stoxx 600 Index is down 0.9% in the European morning and US stock index futures trade flat on the day, suggesting that markets remain risk-averse early Tuesday.

EUR/USD closed in negative territory on Monday and stays relatively quiet below 1.0800 in the European session. French Finance Minister Bruno Le Maire said earlier in the day that an embargo on Russian oil was in the works and added that they were hoping to convince European partners to ban Russian oil in the coming weeks.

GBP/USD lost nearly 50 pips on Monday but manages to hold above 1.3000 so far in the day. 

Fueled by rising US T-bond yields, USD/JPY jumped to its highest level since May 2002 at 128.32 on Tuesday. The pair was last seen consolidating its gains near 128.00. Commenting on the JPY's devaluation, “excessive weak yen or yen's rapid weakening can have a more negative impact but weak yen is basically positive overall,” said Japanese Finance Minister Shunichi Suzuki.

Gold climbed toward $2,000 on Monday but reversed its direction. At the time of press, XAU/USD was trading flat on the day near $1,980.

Bitcoin staged a rebound and seems to have steadied above $40,000 after having dropped to its weakest level in more than a month at $38,550 on Monday. Ethereum gained more than 2% on Monday and managed to reclaim $3,000. ETH/USD is posting small daily losses near $3,050 early Tuesday.