Forex Today: Dollar tumbles, gold shines on a risk-on mood, Bitcoin licks its wounds

Here is what you need to know on Tuesday, May 18:

The market mood has turned positive after the US recovered late on Monday. Optimism about the global recovery and ongoing support from the Fed outweigh virus and inflation concerns. Cryptocurrencies are recovering after suffering from Musk's blows. 

Federal Reserve officials have stuck to their message that the recent rise in inflation is transitory and they see no need to change their policy. That is one of the factors that boosted stocks late on Monday and weighed on the dollar. 

EUR/USD is climbing toward 1.22, the highest since February ahead of the release of Gross Domestic Product (GDP) figures for the first quarter due out later in the day. European countries continue easing restrictions as immunization efforts bear fruit. 

GBP/USD is rising toward 1.42, also buoyed by the upbeat mood and after the UK reported robust labor data. The Unemployment Rate fell to 4.8% in March and jobless claims surprisingly fell by 15,100 in April. 

Gold has been hovering around $1,870, extending its recovery. The precious metal is weathering relatively elevated Treasury yields. Returns on 10-year bonds is around 1.64% as of Tuesday morning. 

See Gold risks a pullback amid overbought conditions, focus shifts to Fed minutes

Virus: The Pfizer/BioNTech and Moderna vaccines provide sufficient protection against the strain first discovered in India, providing some relief for the UK and other countries. On the other hand, infections continue rising in Asia, including previously little harmed places such as Singapore and Taiwan. The US announced it would donate an additional 20 million vaccine doses. 

US Infrastructure: Republicans are set to send the White House a counter-proposal for infrastructure spending on Tuesday as negotiations continue. The offer will likely be substantially smaller than the $4 trillion total that President Joe Biden desires. 

Japan reported a drop of 1.3% in GDP during the first quarter of 2021, marginally below -1.1% projected. It came on top of a downward revision for the fourth quarter. The nation continues battling an increase in covid cases, yet USD/JPY is stable around 109. 

Bitcoin recovered to above $45,000 after nearly dropped below $42,000 on Monday. Tesla founder Elon Musk criticized the granddaddy of cryptocurrencies and hinted that his company would sell out of them. Other digital coins are also recovering on Tuesday.