Forex Today: Dollar holds its ground as risk flows return

Here is what you need to know on Friday, February 18:

The market mood seems to have improved early Friday with Russia announcing a retreat of troops ahead of US President Joe Biden's meeting with leaders of Canada, France, Germany, Italy, Poland, Romania, Britain, EU and NATO. Despite the positive shift witnessed in sentiment, the dollar stays resilient against its rivals. January Existing Home Sales from the US and February Consumer Confidence data from the euro area will be featured in the economic docket ahead of the weekend but investors are likely to stay focused on geopolitical headlines.

US Secretary of State Anthony Blinken told to the UN Security Council that they can't confirm Russia was drawing down its forces. "Russia plans to manufacture a pretext for its attack on Ukraine," Blinken added and Wall Street's main indexes fell sharply alongside US Treasury bond yields late Thursday.

Interfax news agency, however, reported Friday morning that mechanised infantry units were returning to Dagestan after drills in Crimea and noted that a train carrying tanks was departing for the base. Risk flows returned to markets on this development. On the flip side, several news outlets reported that shelling in the contested Donbas region of Eastern Ukraine between the armed forces of Ukraine and pro-Russia separatists took place early Friday.

After closing flat on Thursday, the US Dollar Index continues to move sideways below 96.00 and the benchmark 10-year US T-bond yield, which fell more than 3% on Thursday, is posting small daily gains at 1.98%. Reflecting the risk-positive market environment, US stock futures indexes are rising between 0.6% and 0.8%.

EUR/USD struggled to make a decisive move in either direction on Thursday and continues to trade in a narrow channel above 1.1350 early Friday.

Gold continued to find demand as a safe haven on Thursday and gained more than 1.5% to touch its highest level since June at $1,902. The precious metal is staging a technical correction and trading below $1,900 heading into the European session.

GBP/USD registered gains for three straight days before turning calm above 1.3600. The UK's Office for National Statistics reported that Retail Sales rose by 9.1% on a yearly basis in January. This reading came in better than the market expectation for an increase of 8.7%.

USD/JPY is trading in the positive territory above 115.00 on the back of rising US T-bond yields and improving mood following a two-day decline. The data from Japan showed that the National Consumer Price Index declined to 0.5% on a yearly basis in January from 0.8% in December, compared to the market expectation of 0.6%.

The risk-averse market atmosphere weighed heavily on cryptocurrencies on Thursday and Bitcoin fell more than 7%. BTC/USD is trading slightly above the key $40,000 mark early Friday. Similarly, Ethereum lost 7.4% on Thursday and declined below $3,000 before going into a consolidation phase near $2,900.