The retracement moves in the two weeks prior is set to pin the dollar to finish lower in the month of May, which would be its first monthly decline this year. There is a pause to the dollar momentum from the surge in April as the bond market takes a breather from the selling pressure, with yields dropping from recent highs.
But as inflation comes back into focus this week, we are seeing yields push higher - particularly in Europe. 10-year German bund yields are up another 3 bps to 1.07%, its highest in two weeks, while 10-year Treasury yields (with a one-day gap) are up 7 bps to 2.82%.
Meanwhile, the dollar is nudging higher but gains are rather measured with not much technical significance as of yet.
Elsewhere, equities are looking sluggish on the day with S&P 500 futures down 0.4% and European indices down around 0.4% to 0.7% across the board on the day. Risk appetite looks sapped to end the month and that is helping slightly with dollar sentiment as well perhaps.
EUR/USD is down 0.4% to around 1.0730, with the low today hitting 1.0722 and testing the 100-hour moving average. That came right after the release of the Eurozone May CPI report.
Buyers are still in near-term control but there are rising concerns on the ECB outlook if the euro area economy fails to hold up in Q2 or Q3, even if inflation may still warrant tighter monetary policy.
USD/JPY is also up 0.3% to around 127.80-90 levels with gains kept in-check just below 128.00 for now. Meanwhile, GBP/USD is down 0.4% but hovering around 1.2600 as buyers are also hanging on around its own 100-hour moving average at 1.2605.
The dollar is also keeping a light advance against the commodity currencies with USD/CAD up 0.2% to 1.2680 despite oil prices moving to 12-week highs, while AUD/USD is down 0.2% to 0.7180 on the day.
