Forex Today: Fear grips markets, boosts dollar ahead of critical US inflation data

Here is what you need to know on Wednesday, May 12: 

Markets are in a "risk-off" mode as worries about the Israeli/Palestinian escalation, fuel supplies in the northeast US and rising rates amid increasing inflation have taken over ahead of US CPI data. Speeches from central bankers and new economic forecasts from the EU are also eyed. Cryptocurrencies are mixed.

Middle East: The conflict between Israel and Hamas in Gaza has been escalating with barrages of attacks. Worries about further deterioration and warnings from the UN about a "full-scale war" that began over a local issue in Jerusalem are keeping oil prices bid and contributing to the risk-off mood.

Some gas stations in the northeast US are running dry as deliveries from Colonial Pipeline remain stuck following a ransomware attack. Authorities have vowed to restore service in the next few days. The issue is adding to the damp mood. 

Fears of an overheating US economy and rate hikes from the Federal Reserve remain rife despite dovish comments from Federal Reserve officials – who say inflation is transitory. Fed Vice-Chair Richard Clarida and his colleague Raphael Bostic are slated to speak later in the day. 

US Consumer Price Index data for April are projected to show a bump up in all measures, only partially a result of base effects. CPI tumbled this time last year due to the virus. 

US Consumer Price Index April Preview: The two base effects on inflation

EUR/USD is pressured under 1.2150 amid the greenback's strength and ahead of new economic forecasts from the EU. GBP/USD is changing hands above 1.41 but below the highs after UK Gross Domestic Product statistics beat estimates with a squeeze of only 1.5% in the first quarter. Bank of England Governor Andrew Bailey will speak later in the day.

Tech stocks are struggling more than others while gold is also dragged down, trading around $1,830. US 10-year yields are hovering above 1.61% as inflation concerns grow. 

Coronavirus: Experts estimate that the current COVID-19 wave in India is peaking, yet daily cases remain over 300,000. Infections continue dropping in Western countries, with scientists awaiting trial results from CureVac, a German firm that developed an mRNA vaccine. 

Cryptocurrencies: Bitcoin is trading around $57,000 while Ethereum has resumed its gains and tops the $4,000 level. Dogecoin is below $0.50 after receiving a boost from Elon Musk on Tuesday.