Forex Today: Dollar weakens amid risk appetite; eyes turn to Australian jobs data

A busy session is ahead in Asia, with several key reports scheduled for release. The most important report will be the Australian employment data. In New Zealand, the government will deliver the Budget 2023, and wholesale inflation data is also due. Japan will report its trade balance figures. The Kiwi has been outperforming, but the Budget and the PPI could challenge its strength. The Aussie has been under pressure, and the jobs numbers could be crucial for its performance.

Here is what you need to know on Thursday, May 18:

Wall Street indexes rose more than 1%, while the US Dollar pulled back amid an improvement in market sentiment. However, higher US yields provided support to the Greenback. Easing bets for year-end rate cuts pared further, and on the contrary, odds of a rate hike in June advanced on US economic data, optimism about a debt ceiling deal, and fewer concerns about the banking sector.

Debt ceiling talks show some progress, but a resolution is not yet on the table. US President Biden shortened his trip to Asia. Housing data from the US came in mixed. On Thursday, the US will report weekly Jobless Claims, the Philly Fed, and Existing Home Sales.

The US Dollar Index (DXY) finished higher near 103.00, but off highs. The US 10-year Treasury yield rose to 3.57%, the highest level in almost a month.

EUR/USD hit monthly lows near 1.0800 before rising to the 1.0850 area. However, the Euro lagged following comments from European Central Bank (ECB) officials with a dovish tilt. EUR/GBP posted the lowest daily close since mid-December around 0.8675.

GBP/USD hit weekly lows at 1.2420 and then rose back to 1.2500. Bank of England (BoE) Governor Bailey sounded hawkish, helping the Pound.

USD/JPY jumped from 136.40 to 137.55, posting the strongest close since December, boosted by higher government bond yields and the better tone in equity markets. Japan reported better-than-expected Q1 GDP data and will release trade data on Thursday. 

AUD/USD reached weekly lows at 0.6627 but finished modestly higher, uplifted by a weaker US Dollar. Australia will release the April Employment report on Thursday, and the market consensus is for a 25,000 increase in jobs.

NZD/USD rose on Wednesday and peaked at the 100-day Simple Moving Average (SMA) at 0.6270 before pulling back a bit. New Zealand's Q1 Producer Price Index is due on Thursday, and the government will present the Budget 2023.

The Loonie outperformed among commodity currencies, boosted by a 2.70% rally in crude oil prices. USD/CAD dropped almost a hundred pips from the intraday highs, settling at 1.3445.

On a volatile day, USD/MXN climbed to 17.68 and then eased to 17.55. The Bank of Mexico will announce its decision on Thursday, and it is expected to be a close call.

Gold remains under pressure while silver offered some signs of stabilization. XAU/USD bottomed at $1,974 but is still holding above the crucial support area of $1,970.