Forex Today: Modest improvement in market mood ahead of mid-tier data

Here is what you need to know on Friday, May 13:

After having registered its highest close in nearly two decades 104.75, the US Dollar Index is edging lower early Friday amid an improving market mood. Industrial Production data from the euro area will be looked upon for fresh impetus ahead of Export Price Index and Import Price Index figures from the US. The University of Michigan will release the preliminary Consumer Sentiment Index data for May as well. Investors will continue to pay close attention to comments from central bankers ahead of the weekend. 

In a statement published early Friday, Deputy mayor Wu Qingat of China’s Shanghai city said that they are aiming to reach zero-Covid infections at the community level by mid-May. Shanghai will aim to open up, ease traffic restrictions and open shops in an orderly manner," the mayor added. The Shanghai Composite Index gained traction on this development and was last seen rising 0.8% on a daily basis. Reflecting the positive shift witnessed in risk sentiment, US stock index futures are up between 0.65% and 1.25% in the early European morning.

On Thursday, the data from the US revealed that the Core Producer Price Index (PPI) declined to 8.8% in April from 9.6% in March, compared to the market expectation of 8.9%. Meanwhile, in an interview with Marketplace radio, FOMC Chairman Jerome Powell reiterated that he expects the policy rate to rise by 50 basis points at each of the next two policy meetings. Nevertheless, the benchmark 10-year US Treasury bond yield fell for the fourth straight day on Thursday and remains on track to snap a five-week rising streak. 

EUR/USD dropped to its lowest level since early 2017 at 1.0353 on Thursday. The pair fluctuates in a relatively tight range at around 1.0400 early Friday.

GBP/USD fell below 1.2200 for the first time in nearly two years on Thursday but seems to have gone into a consolidation phase above that level on Friday. On a weekly basis, the pair is down 200 pips.

The Japanese yen capitalized on safe-haven flows on Thursday and USD/JPY broke below its two-week-old trading channel. The pair stays relatively quiet in the European morning and trades below 129.00.

Gold failed to find demand despite falling US Treasury bond yields and encountered technical selling pressure after dropping below the key 200-day moving average. At the time of press, XAU/USD was trading at its lowest level since early February near $1,820. 

Bitcoin is edging higher early Friday and was last seen rising more than 4% on the day at $30,250. The capital outflow from altcoins seems to be helping BTC hold its ground for the time being. Similarly, Ethereum is up 7% on a daily basis and trading slightly above $2,000 after having touched its lowest level in nearly a year at $1,700 on Thursday.

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