Forex Today: US Dollar retreats as focus shifts to debt ceiling talks

Eren Sengezer FXStreet

Here is what you need to know on Monday, May 22:

The US Dollar (USD) stays on the back foot to start the new week as market participants stay focused on headlines surrounding the debt limit negotiations in the US. In the European session, Germany's Bundesbank will release its monthly report and Eurostat will publish the preliminary Consumer Confidence Index data for May. There won't be any high-impact macroeconomic data releases featured in the US economic docket but several Fed officials will be delivering speeches.

While speaking on Friday, FOMC Chairman Jerome Powell reiterated that they are strongly committed to return inflation to the 2% target. Regarding the potential impact of the recent banking crisis on the policy, Powell said that rates may not need to rise as much as it would have otherwise. Although the US Dollar Index, which tracks the USD's performance against a basket of six major currencies, registered losses on Friday, it ended up closing the second straight week in positive territory.

Following his phone call with House Republican Speaker Kevin McCarthy on Sunday, US President Joe Biden said that the conversation went well and added that they will speak again on Monday. Meanwhile, US Treasury Secretary Janet Yellen said over the weekend that June 1 is the "hard deadline" to raise the debt ceiling.

EUR/USD touched its lowest level since late March at 1.0760 on Friday but managed to stage a technical correction ahead of the weekend. The pair trades in a narrow channel slightly above 1.0800 early Monday.

Despite the broad-based US Dollar strength, GBP/USD held its ground and closed virtually unchanged last week. Nevertheless, the pair is having a difficult time gaining traction at the beginning of the week and moving sideways below 1.2450.

USD/JPY gained more than 200 pips last week and registered its highest weekly close since November. The pair stays quiet in the European morning and fluctuates below 138.00.

Gold price stayed under heavy bearish pressure amid rising US Treasury bond yields last week and came within a touching distance of $1,950. Although XAU/USD recovered decisively on Friday, it is struggling to build on those gains early Monday while trading slightly below $1,980.

AUD/USD trades in the red below 0.6650 early Monday. In the Asian session on Tuesday, S&P Global will release Manufacturing and Services PMI reports for Australia.

Bitcoin posted marginal losses on Sunday but stayed in its weekly range. Early Monday, BTC/USD trades flat on the day slightly below $27,000. Ethereum continues to fluctuate in a tight channel at around $1,800 following the previous week's indecisive action.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.