Forex Today: Markets Remain Cautiously Optimistic, US Dollar Extends Rally

Here is what you need to know on Tuesday, May 30:

The US Dollar (USD) continues to gather strength against its rivals as trading conditions normalize following Monday’s subdued action. The US Dollar Index sits at its highest level since mid-March, near 104.50, ahead of the Conference Board’s Consumer Confidence report for May and Housing Price Index data for March. The European economic docket will feature business and consumer sentiment surveys. 

Following Sunday’s agreement between US President Joe Biden and Republican House Speaker Kevin McCarthy to suspend the debt limit, the House Rules Committee and the House are expected to vote on the bill on Tuesday and Wednesday, respectively. Meanwhile, Biden will reportedly hold calls with Democratic members of the House ahead of the vote. 

Reflecting the positive impact of this development on risk mood, US stock index futures are up between 0.2% and 0.6% in the European trading hours. However, the Euro Stoxx 50 Index trades virtually unchanged on the day.

EUR/USD registered small losses on Monday and continued to stretch lower early Tuesday. The par was last seen trading at its weakest level in 10 weeks, below 1.0700. Earlier in the session, the data from Spain showed that the annual Harmonized Index of Consumer Prices declined 0.2% monthly in May, dragging the yearly increase lower to 2.9% from 3.8% in April.

Despite the continued USD strength, GBP/USD managed to keep its footing on Tuesday and extended its sideways grind near 1.2350. 

After rising toward 141.00 during the Asian trading hours on Tuesday, USD/JPY reversed its direction and fell sharply. At the time of press, the pair traded in negative territory below 140.50. Earlier in the day,  “the Bank of Japan (BoJ) will patiently maintain the easy monetarypolicy as there is still a distance to go to stable 2% inflation,” said BoJ Governor Kazuo Ueda.

Gold price slumped to its lowest level since early March, near $1,930 on Tuesday but reversed its direction in the European morning. With the benchmark 10-year US Treasury bond yield losing nearly 1% below 3.8%, XAU/USD erased its daily losses and turned flat above $1,940.

Bitcoin failed to build on Sunday’s gains and posted marginal losses on Monday. BTC/USD holds steady above $27,500 early Tuesday. Similarly, Ethereum lost nearly 1% on Monday but stabilized near $1,900. 

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