Daily Market Update
May 21, 2026EUR/USD ranged from the high 1.15’s to low 1.16’s overnight. EUR/USD struggles to extend its recovery after closing in positive territory on Wednesday and declines toward 1.1600.
Disappointing May PMI data from the Eurozone hurt the Euro, while the risk-averse market atmosphere helps the USD stay resilient against its rivals, causing the pair to edge lower ahead of key US PMI data.
Despite renewed hopes for a de-escalation in the Iran conflict, investors remain skeptical about a US-Iran peace deal amid major disagreements over Tehran’s nuclear program and a standoff over the critical Strait of Hormuz.
Furthermore, hawkish FOMC Minutes reaffirmed bets for an interest rate hike in 2026, which helps limit the US Dollar’s (USD) corrective pullback from a six-week low and acts as a headwind for the EUR/USD pair.
GBP/USD stays on the back foot and trades below 1.3450 following the mixed PMI data from the UK. The uncertainty surrounding US–Iran talks check the British Pound’s upside attempts against the US Dollar while traders await the preliminary readings of the PMI for May from the US.
The UK headline Consumer Price Index (CPI) inflation eased to 2.8% over the year in April from 3.3% in March, the Office for National Statistics (ONS) showed on Wednesday. This figure came in softer than the expectation of 3.0%. Additionally, the core CPI, excluding volatile food and energy items, rose 2.5% year-over-year in April, versus 3.1% prior and below the market consensus of 2.6%.
This UK inflation data, combined with an unexpected rise in the Unemployment Rate to 5.0%, prompted traders to scale back expectations for future Bank of England (BoE) rate hikes by December. UK rate futures pointed to around 52 basis points (bps) of BoE policy tightening by December, versus about 60 bps on Tuesday, according to Reuters.
US President Donald Trump said on Wednesday that negotiations with Iran were in the final stages, while warning of further attacks unless Iran agrees to a deal. Meanwhile, Iranian President Masoud Pezeshkian stated that Tehran was not on the brink of giving in and threatened to retaliate for any strikes with attacks beyond the Middle East.
Ongoing tensions between the US and Iran could lift the Greenback and act as a headwind for the major pair in the near term.
USD/JPY remains subdued for the second successive day, trading around 158.90 during the early European hours. The currency pair is holding a constructive bullish bias as spot remains above both the nine-day and 50-day Exponential Moving Averages.
Additionally, the 14-day Relative Strength Index at 54.5 sits in neutral-positive territory, hinting that upside momentum is steady rather than stretched, which keeps the broader uptrend intact while the USD/JPY pair consolidates just under recent highs.
USD/JPY remains subdued for the second successive day, trading around 158.90 during the Asian hours on Thursday. The pair depreciates as the Japanese Yen (JPY) holds gains following the release of Japan’s Merchandise Trade Balance Total data.
Japan’s trade balance swung to a surplus of JPY 301.9 billion in April 2026, reversing a deficit of JPY 149.5 billion from the same period last year and significantly outperforming the market’s projected JPY 29.7 billion shortfall.
Japan’s Exports surged by 14.8% year-on-year to a near-record JPY 10,507.3 billion, accelerating from an 11.5% increase in March and recording the strongest growth in three months.
Over the same period, Imports grew by 9.7% to JPY 10,205.4 billion. While this represents a slight deceleration from the 10.9% gain seen in March, the figure still surpassed market expectations of an 8.3% increase.
Source FX Street
