Focus on ISM today

Frank Walbaum

lmportant news this week:

Wed, 01st, 15:00 CET US Fed Chairman Warsh Speech
Wed, 01st, 15:00 CET UK BoE Chairman Bailey Speech
Thu, 02nd, 14:30 CET US Nonfarm Payrolls/Average Hourly Earnings

Dollar strength returns as markets await ISM data

The US dollar continues to strengthen, remaining one of the dominant themes across financial markets. While equities have managed to hold recent gains, momentum has slowed noticeably as investors become more cautious ahead of today's ISM Manufacturing PMI. The report will provide another important update on the health of the US economy and could shape expectations ahead of this week's Non-Farm Payrolls release. A stronger-than-expected PMI would likely reinforce the view that the US economy remains resilient, providing further support for the dollar.

Equity markets continue to trade sideways, suggesting that investors are reluctant to take on significant new positions before key economic data. Precious metals remain vulnerable, with Gold and especially Silver at risk of testing recent lows should the dollar extend its rally. The Japanese Yen continues to weaken, with yield differentials remaining firmly in favor of the US Dollar. Meanwhile, FX traders are closely monitoring whether current dollar strength can develop into a broader breakout across major currency pairs.

Market talk

Market sentiment remains cautiously positive but is beginning to lose momentum. A stronger US Dollar is creating headwinds for metals and several major currencies, while equities remain resilient despite limited upside. Investors are now shifting their focus toward today's ISM Manufacturing PMI and Friday's NFP report, both of which could significantly influence expectations for Fed policy. Strong economic data would likely support the dollar further, while weaker figures could revive expectations for future rate cuts and improve sentiment across risk assets. For now, markets remain in wait-and-see mode.

Tendencies in the markets

Equities sideways, USD stronger, BTC weak, oil weak, Silver weak, Gold weak.

Author

Frank Walbaum

AUD/USD hits nine-week lows below 0.7000 on RBA Bullock's remarks

AUD/USD reverses a brief uptick and turns lower to hit nine-week lows below 0.7000 in the European morning on Tuesday, as traders digest cautious remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock during the press conference. Earlier on, the RBA raised the cash rate to 4.60%, as widely expected, leaving the door open to further rate hikes if needed.

USD/JPY consolidates near 157.50 as a bullish USD counters intervention risks

USD/JPY struggles to capitalize on the overnight bounce from a one-week low, consolidating around 157.50 in the Asian session on Tuesday. Trump's concerns about the Japanese Yen's weakness fueled speculation about another US-Japan joint intervention. This, along with the hawkish BoJ, underpins the JPY and caps the currency pair. Meanwhile, rising Fed rate-hike bets and oil-driven inflation fears continue to push US bond yields to multi-year highs, keeping the US Dollar pinned near a two-month high and supporting the pair.

Gold trims gains; back toward $4,150

Gold now surrenders some of its initial advance and retests the $4,150 zone per troy ounce on Tuesday. Meanwhile, the move higher in the yellow metal comes despite the firmer US Dollar and rising US Treasury yields across the board, while escalating geopolitical tensions appear to limit the downside potential.

Crypto Today: Bitcoin, Ethereum, XRP correct upward amid declining ETF inflows

The cryptocurrency market upholds a neutral-to-bullish bias on Tuesday, with Bitcoin edging closer to a breakout above $84,000. Altcoins mirror BTC’s outlook, with Ethereum holding above $2,700 and Ripple pushing past the reclaimed $1.50 level.

RBA recap: Rate hikes are on the table as demand stays too strong

The Reserve Bank of Australia unanimously tightened monetary policy, warning that inflation remained too high and that several upside risks had begun to materialise. Governor Michele Bullock said the Board would raise rates again if necessary.

Silver is more volatile than Gold ahead of PCE and NFP. This chart shows the positioning gap

The market’s attention is focused on American data this week, but there’s something only those with a trained eye may be looking at: Gold and Silver positioning gap. Financial markets are moving on fears, mostly related to persistently high energy prices driven by the Middle East war. Sure, the US Dollar (USD) is strong, but at what cost?