Forex Today: Cheerful mood depresses dollar, ECB could weigh on the euro, Musk lifts Bitcoin

Here is what you need to know on Thursday, July 22:

The market mood remains cheerful, allowing the dollar to retreat, while higher yields weigh on gold. The euro is lagging as tensions rise towards the potentially dovish ECB decision. Bitcoin receives a boost from cheerleaders and markets eye covid headlines. 

Risk-on: US stock markets advanced for a second consecutive day, reversing Monday's sell-off. Investors are cheering company earnings and shrugging off covid concerns as firms – including those in sectors related to the reopening – post upbeat forecasts. US coronavirus cases have nearly tripled since the trough in June. 

US Treasuries are sold off, pushing 10-year bond yields back toward 1.30%. The greenback is losing ground only to the yen and retreating against other currencies. Gold is a notable loser, struggling to hold onto the $1,800 as higher returns on US debt make the yieldless precious metal less attractive. 

Dovish tilt?: The European Central Bank is set to announce its first decision following its announcement of a strategic review. That change includes allowing inflation to hover around 2% rather than capping prices rises below that ceiling. ECB President Christine Lagarde promised communication changes and potential developments related to the bank's bond-buying scheme.

Expectations have capped EUR/USD under 1.18. Covid cases continue rising in the old continent

See:

• ECB Preview: Three reasons why Lagarde could hit the euro when it is down
• European Central Bank Preview:  Fresh forward guidance, old fear

Brexit: David Frost, the UK's head negotiator, said that Britain wants to renegotiate the Northern Irish protocol as it is causing issues. Brussels rejected any attempt to change the terms of the agreement. GBP/USD seems to have shrugged off both Brexit and UK covid cases – which are above 40,000 per day – and recover to 1.37.

Coronavirus in Asia: India's covid death toll is estimated at around four million, according to the analysis of excessive deaths, far above official figures. The Delta variant continues spreading in Asia, including in Tokyo's Olympic Village ahead of the opening ceremony. 

Spending from Uncle Sam: Democrat and Republican lawmakers continue negotiating their infrastructure bill, which is reportedly in its last stretch. Weekly jobless claims are also of interest. 

Bitcoin has recaptured $32,000 and Ethereum is nearing $2,000 after Tesla founder Elon Musk hinted that his company could return to accepting BTC as payment for its vehicles. Cathie Wood of ARK Investment added that the digital coin is a hedge against inflation. On the other hand, Googenheim's Scott Minerd forecast a halving to $15,000 due to competition with other coins among other factors. 

See Elon Musk reveals personal crypto holdings, Tesla likely to resume accepting Bitcoin