Forex Today: Not even risk appetite slows the Dollar

The economic calendar is light on Friday. During the Asian session, New Zealand will report on exports and imports, as well as Credit Card Spending. Japan will release inflation data and the Tertiary Industry Index. Later in Europe, the highlight will be German wholesale inflation. The rally of the US dollar is in focus, and the slide in Gold price also deserves attention.

Here is what you need to know on Friday, May 19:

US stocks had another positive day, with the Dow Jones gaining 0.34% and the Nasdaq jumping 1.51%. Optimism about a debt ceiling deal, as well as upbeat economic data, fueled risk appetite. The US dollar rose across the board, even against high-yielding currencies. The US Dollar Index rose 0.65% to settle at 103.50, its highest level in two months. The dollar looks firm, however, most currency pairs show extreme oversold readings.

Economic data from the US came in above expectations, with Jobless Claims and the Philly Fed. Hawkish comments from Federal Reserve officials, along with hopes of a resolution to the debt ceiling drama, triggered a selloff in Treasury bonds. The US 10-year yield rose to 3.65%, the highest in two months. Investors continue to pare bets of Fed rate cuts by year-end and consider the possibility of another rate hike in June. More Fed talk is scheduled for Friday, including Chair Powell.

EUR/USD dropped towards 1.0750, falling for the fifth time in the last six trading days. On Friday, Germany will report the Producer Price Index for April. The European Central Bank (ECB) will release its Economic Bulletin, and ECB officials Schanbel and Lagarde will speak. 

GBP/USD tumbled, testing levels under 1.2500. EUR/GBP finished flat around 0.8680, holding weekly losses. 

The Japanese Yen was the worst performer, affected by rising government bond yields. USD/JPY advanced for the sixth consecutive day, reaching levels above 138.50, the highest since November. Inflation data from Japan is due on Friday.

The Australian dollar lagged following the Australian employment data. AUD/USD dropped below 0.6640 and is looking at 0.6600.

NZD/USD held above 0.6200 and posted modest losses after the presentation of the Budget and wholesale inflation figures. Trade data and Credit Card Spending are due in New Zealand.

USD/CAD rose toward 1.3500 and remains in a familiar range. On Friday, March retail sales will be released in Canada.

Gold suffered heavy losses after breaking the $1,970 support area and fell to $1,950. The yellow metal remains under pressure. Silver also lost ground, extending weekly losses, with XAG/USD settling at $23.50, the weakest close since late March.