Forex Today: Dollar extends correction amid a quiet start to the NFP week

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

Risk-flows extend into a fresh week this Monday, as investors cheer news that Shanghai authorities will cancel many conditions for businesses to resume work from Wednesday, easing a city-wide lockdown.

The upbeat market mood helps the safe-haven US dollar to continue with its downward correction from two-decade peaks. Fading hopes for aggressive tightening by the Fed after the expected 50 bps rate hikes in June and July also adds to the weakness in the greenback while weighing on the Treasury yields across the curve. The benchmark 10-year Treasury yields wallow near the lowest level since mid-April.

Undermining the sentiment around the dollar, traders assess the recent series of discouraging US macro data, which have signaled an economic slowdown in the world’s largest economy.

Meanwhile, the Asian stocks are trading firmer and the S&P 500 futures are gaining 0.90% so far, reflecting the positive risk tone. Looking ahead, the German inflation, Eurozone’s consumer sentiment data and European Union (EU) leaders’ meeting to discuss the additional support for Ukraine and new sanctions against Russia will be closely followed.

Ahead of the summit, EU’s Foreign Policy Chief Josep Borrell said, “we won't fail on oil embargo in next sanctions package against Russia.”

The Memorial Day holiday in the US is likely to keep the forex trading activity limited.

EUR/USD is consolidating around 1.0750 in early Europe, digesting dovish comments from the ECB Chief Economist Philip Lane, as he favors a 25-bps rate hike. The upcoming EU Summit is also keeping the euro on the edge.

GBP/USD is clinging to the early gains while trading below 1.2650. The upside in cable appears capped amid the UK growth concerns, despite the fiscal support to households offered last week.

Among other fx majors, USD/JPY is at the mercy of the dollar and the yields price action, shrugging off comments from BOJ Governor Haruhiko Kuroda on inflation. The pair is currently trading on the defensive at around 127.00. AUD/USD is re-approaching 0.7200, capitalizing on the Shanghai reopening news.

Gold is advancing above $1,860, eyeing a retest of the two-week highs of $1,.870 amid the persistent weakness in the dollar, as well as the yields.