Forex Today: US Dollar gathers strength as Fed rate hike bets grow, Canadian CPI data looms
Here is what you need to know on Tuesday, May 19:
The US Dollar (USD) holds positive ground near 99.15 in early European trading on Tuesday, bolstered by the unclear geopolitical situation.
Traders digested US President Donald Trump's announcement that he would “hold off” an attack on Iran scheduled for Tuesday at the request of Gulf leaders. Trump further stated that the US would be “probably satisfied” if it could reach an agreement with Iran that prevents Tehran from obtaining a nuclear weapon, per the Guardian. However, the US President stated that Washington was prepared to attack if an acceptable deal wasn’t reached but didn’t set a deadline.
Traders reprice the chance that the US Federal Reserve (Fed) would have to tighten policy to contain inflation with the Strait of Hormuz remaining closed and energy markets disrupted. Traders are pricing in a 35.0% probability that the Fed will raise interest rates by 25 basis points (bps) by year-end, according to the CME FedWatch tool.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.14% | 0.20% | 0.11% | 0.04% | 0.48% | 0.25% | 0.15% | |
| EUR | -0.14% | 0.06% | -0.02% | -0.10% | 0.36% | 0.13% | 0.01% | |
| GBP | -0.20% | -0.06% | -0.06% | -0.16% | 0.28% | 0.10% | -0.04% | |
| JPY | -0.11% | 0.02% | 0.06% | -0.10% | 0.33% | 0.14% | 0.01% | |
| CAD | -0.04% | 0.10% | 0.16% | 0.10% | 0.44% | 0.23% | 0.11% | |
| AUD | -0.48% | -0.36% | -0.28% | -0.33% | -0.44% | -0.20% | -0.32% | |
| NZD | -0.25% | -0.13% | -0.10% | -0.14% | -0.23% | 0.20% | -0.13% | |
| CHF | -0.15% | -0.01% | 0.04% | -0.01% | -0.11% | 0.32% | 0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The preliminary report published by the Cabinet Office showed on Tuesday that the Japanese economy expanded 0.5% QoQ in the first quarter (Q1) of 2026, compared to a 0.3% growth seen in Q4 of 2025. This figure came in stronger than the expectation of a 0.4% expansion.
Meanwhile, Japan’s economy grew at an annualized 2.1% in Q1, versus 1.3% growth prior, above the market consensus of 1.7%, on the back of improved consumption and strong exports.
The Reserve Bank of Australia (RBA) minutes showed eight of nine board members backed the May rate hike to 4.35%, citing rising inflation risks from the Gulf conflict. One member preferred to await further data.
“Members noted that inflation had been well above target in the months prior to the onset of the conflict in the Middle East,” the RBA minutes said. Members agreed that monetary policy could not prevent a near-term increase in the price level as higher fuel prices worked their way through to final prices.
Looking ahead, traders brace for the Canadian Consumer Price Index (CPI) inflation report, which is due later on Tuesday. The headline CPI is expected to show a rise of 3.1% year-over-year in April, compared to 2.4% in March. On a monthly basis, the CPI is projected to show an increase of 0.6%, versus 0.9% prior.
EUR/USD loses traction to near 1.1645 in the European morning. Energy supply constraints stemming from Middle East tensions could weigh on the shared currency. However, hawkish remarks from European Central Bank (ECB) policymakers might help limit the EUR’s losses.
GBP/USD remains weak around 1.3415, pressured by UK political turmoil. The UK ILO Unemployment Rate climbed to 5.0% in the three months to March after reporting 4.9% in the previous reading, according to the Office for National Statistics (ONS) on Tuesday. This figure came in above the market consensus of 4.9%.
Meanwhile, the number of people claiming jobless benefits rose by 26.5K in April, compared with a revised increase of 4.9K in March and the expected 27.3K gain. The Employment Change arrived at 148K in March, versus 25K seen in February.
USD/JPY edges higher to near 158.90, extending its rally for a seventh consecutive day, in the European morning on Thursday. Japan’s Finance Minister Satsuki Katayama said on Monday that officials stand ready to act against excessive foreign exchange volatility at any time, while ensuring that any intervention is conducted in a way that avoids pushing up US Treasury yields.
Gold tumbles to $4,545 after posting modest gains on Tuesday. The Iran war has fueled inflation concerns and expectations of tighter monetary policy, weighing on the precious metals.
Inflation FAQs
What is inflation?
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
What is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
What is the impact of inflation on foreign exchange?
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
How does inflation influence the price of Gold?
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
