Forex Today: Sentiment hurts the greenback

FXStreet Team FXStreet

What you need to know on Monday, May 17:

The greenback fell on Friday, following worse-than-expected US data. Retail Sales showed no growth in April, down from 10.7% in the previous month, while the core reading fell 1.5%. Also, the preliminary estimate of the Michigan Consumer Sentiment Index resulted in 82.8 in May, down from the previous 88.3 and the expected 90.4. Also, Industrial Production rose a modest 0.7% in April.

Speculation that the US Federal Reserve would need to tighten its monetary policy amid increased inflationary pressures cooled down, to the detriment of the American currency. Stocks surge while government bond yields retreated.

Most dollar’s rivals advanced, with EUR/USD and GBP/USD poised to extend their gains. Among commodity-linked currencies, the aussie is the weakest and the CAD the strongest.

The optimistic market sentiment will be tested at the weekly opening by Chinese data. The country will publish April Retail Sales and Industrial Production, both expected to have advanced at a slower pace than in March.

In the UK, Prime Minister Boris Johnson offered a mixed message over coronavirus developments. On one hand, he said that the government does not believe it would need to delay reopening, as there’s no evidence of stress in the health system. Nevertheless, he noted that there are some important unknowns and that they will remain vigilant.

Over the weekend, the leaders of Ireland and PM Johnson met to discuss a smooth trade relationship with Northern Ireland. The UK macroeconomic calendar has nothing to offer until next Tuesday when it will publish employment-related figures. Brexit-related tensions keep putting a lid on the pound.

Spot gold surged to a fresh three-month high of $ 1,845.88 a troy ounce, ending the week with substantial gains at 1,843. Crude oil prices also advanced on Friday, with WTI settling at $ 65.50 a barrel, unchanged for the week.

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EUR/USD remains bid, focus stays on 1.1900

EUR/USD has broken its two-day run of losses and is ticking modestly higher on Thursday, hovering around the 1.1880 area as the US Dollar struggles to find clear direction. Weekly Initial Jobless Claims rose more than expected, taking a bit of shine off the Greenback, but markets are largely in wait-and-see mode ahead of Friday’s US CPI release.

GBP/USD sticks to the bid bias, still below 1.3700

GBP/USD is trading with decent gains around 1.3650 on Thursday. Indeed, Cable is attempting to shake off the weakness seen earlier in the week amid another choppy session for the Greenback, while a run of disappointing UK data has so far failed to derail the pair’s tentative recovery.

Gold recedes slightly, trades below $5,100

Gold remains stuck in choppy trade on Thursday, deflating marginally just below the $5,100 mark per troy ounce as the US Dollar drifts without a clear trend. Softer US Treasury yields across the curve are offering some support, but with markets treading carefully ahead of Friday’s US CPI release, conviction remains limited and price action continues to look hesitant.