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Forex Today: Quiet markets ahead of PMIs, awaiting a debt-limit deal

Tuesday is important for PMI releases, as it will offer the first glimpse of global economic activity during May. During the Asian session, the S&P Global Composite PMI is scheduled for release in Australia, followed by Japan later in the day. Later will be the turn of Europe and the US.

Here is what you need to know on Tuesday, May 23:

The US dollar ended the day mostly unchanged on a subdued Monday in financial markets. The focus remains on the ongoing negotiations over the US debt limit, with investors keenly awaiting any developments. US President Biden is scheduled to meet with House Speaker McCarthy later on Monday at 21:30 GMT to continue discussions.

Analysts at Wells Fargo warned: 

For a deal to be reached and turned into law before early June, a breakthrough in the negotiations will need to occur this week.

Banking concerns continue to ease; however, a report by CNN on Friday indicated that Treasury Secretary Yellen told bank CEOs that more mergers might be necessary. Her comments suggest that a return to normalcy is still a ways off. On Tuesday, attention is expected to shift back to economic data with the release of the S&P Global PMIs. Additionally, New Home Sales and Richmond Fed Manufacturing will also be released.

US S&P Global PMIs Preview: Dollar set to rise on a slip in the services sector

The Japanese Yen was among the worst performers, weighed down by government bond yields that remain at monthly highs. The 10-year Treasury yield settled at 3.72%, the highest since March 9. USD/JPY rose above 138.50, toward last week's highs, but faces resistance around the 138.80 area. Monday's data from Japan revealed that the core machinery orders unexpectedly dropped by 3.9% in March. The Japan Jibun Bank PMI is due to be released on Tuesday.

After rebounding on Friday, the EUR/USD pair traded flat, moving sideways and testing levels below 1.0800. Market participants are now focused on the release of preliminary Eurozone PMI numbers scheduled for Tuesday. The readings are expected to be crucial (May preliminary), particularly given the current economic environment and the data-dependent forward guidance. Additionally, several European Central Bank (ECB) members, including Guindos, Muller, Nagel, and Villeroy, are set to speak.

GBP/USD finished the day flat, hovering around 1.2430. The UK is set to report on Public Sector Net Borrowing, and PMI data will also be released. On Wednesday, inflation data is due, which could significantly impact the pound.

Commodity currencies traded in narrow ranges against the US dollar. USD/CAD rose marginally, closing above 1.3500. The pair continues to move sideways around the 20-day Simple Moving Average (SMA). On Tuesday, Canada is set to release its wholesale inflation data.

AUD/USD remained below the 20-day SMA but rose to 0.6650 during the American session. On Tuesday, Australia is scheduled to release its PMI data.

NZD/USD posted modest gains, recording its highest daily close in a week but still below the 0.6300 level. On Wednesday, the Reserve Bank of New Zealand (RBNZ) is scheduled to announce its decision on monetary policy. Market analysts expect a rate hike, with some predicting a 25 basis points increase and others forecasting a 50 bps hike.

The South African rand was the strongest performer on Monday, with USD/ZAR pulling back from record highs to 19.20. In contrast, the Mexican peso underperformed, with USD/MXN rising for the fifth consecutive day and approaching 18.00. On Tuesday, the National Bank of Hungary is scheduled for its monetary policy meeting.

Gold retraced some of Friday's gains, with XAU/USD sliding towards $1,970/oz. Silver also declined, closing the day at $23.60. Cryptocurrencies had a mixed performance, with BTC/USD failing to reclaim $27,000. Crude oil prices rose modestly; WTI approached $72.00.


 


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Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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