Forex Today: Cautious start to the week ahead of key US data

Eren Sengezer FXStreet

Here is what you need to know on Monday, June 5:

The US Dollar holds its ground against its major rivals at the beginning of the new week with the US Dollar Index (DXY) building on Friday's gains. Nevertheless, US stock index futures trade mixed, reflecting a cautious stance. April Producer Price Index (PPI) and June Sentix Investors Confidence Index data will be featured in the European economic docket ahead of April Factory Orders and May ISM Services PMI releases from the US.

On Friday, the US Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) in the US rose 339,000 in May, surpassing the market expectation of 190,000 by a wide margin. Further details of the publication revealed that the Unemployment Rate edged higher to 3.7% from 3.4% in April. The DXY regained its traction on the strong NFP reading and retraced a portion of its weekly decline. Early Monday, the index continues to stretch higher and stays in positive territory above 104.00. In the meantime, the benchmark 10-year US Treasury bond yield is already up more than 1% on the day above 3.7%. Nevertheless, the CME Group FedWatch Tool shows that markets are still pricing in a more than 70% possibility that the Fed will leave its policy rate unchanged at the upcoming meeting.

Over the weekend, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman said that Saudi Arabia will make an extra output cut of 1 million barrels per day from July. Moreover, OPEC and its allies (OPEC+) announced in a statement that they have reached a deal to target total output of 40.46 million barrels per day from 2024. Following this development, crude oil prices rise on Monday and the barrel of West Texas Intermediate was last seen rising nearly 2% on the day at $73.20. The commodity sensitive Canadian Dollar stays resilient early Monday and USD/CAD trades flat on the day slightly below 1.3450.

During the Asian trading hours, the data from Japan revealed that the Jibun Bank Services PMI declined to 55.9 in May from 56.3 in April. USD/JPY largely ignored this report and started the new week on a bullish note. At the time of press, the pair was trading in positive territory at around 140.50.

EUR/USD registered big losses on Friday and extended its decline early Monday. The pair was last seen trading below 1.0700.

Despite Friday's pullback, GBP/USD ended up posting small gains last week. The pair stays on the back foot in the European morning and tests 1.2400.

In the early trading hours of the Asian session on Tuesday, the Reserve Bank of Australia (RBA) will announce its monetary policy decisions. The RBA is expected to leave its key interest rate unchanged at 3.85%. Ahead of this important event, AUD/USD stays in the red at around 0.6600.

Reserve Bank of Australia Preview: AUD/USD ready for another hike?

Gold price fell sharply on Friday and erased all of its weekly gains. XAU/USD stays under modest bearish pressure amid rising US yields and trades below $1,950.

Following an indecisive weekend, Bitcoin continues to move up and down in a tight channel slightly below $27,000. Ethereum failed to make a daily close above $1,900 despite having advanced above that level over the weekend. ETH/USD edges lower early Monday and was last seen losing nearly 1% on the day at $1,870.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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