Forex Today: Dollar holds steady ahead of ISM Services PMI data

Here is what you need to know on Tuesday, September 6:

With trading conditions normalizing following the three-day weekend in the US, the US Dollar Index stays relatively quiet early Tuesday. The ISM's August Services PMI will be the only high-tier data featured in the US economic docket. Meanwhile, risk flows seem to have returned with major European equity indices trading in positive territory. Moreover, US stock index futures are up between 0.8% and 1.1% while the benchmark 10-year US Treasury bond yield gains more than 1%.

During the Asian trading hours, the Reserve Bank of Australia (RBA) announced that it hiked its policy rate by 50 basis points (bps) to 2.35% from 1.85%. In its policy statement, the RBA said that it expects to increase the policy rate further over the months ahead but noted that the board is not on a pre-set rate path. Regarding the inflation outlook, the RBA noted that it sees medium-term inflation expectations remaining well-anchored. Although AUD/USD edged higher toward 0.6850 during the Asian session, it lost its traction and turned negative on the day below 0.6800.

Earlier in the day, Germany's Destatis reported that Factory Orders contracted by 13.6% on a yearly basis in July, compared to the market expectation for a decrease of 6.1%. On energy-related news, Gazprom's Deputy CEO Vitaly Markelov stated on Tuesday that Nord Stream 1 pipeline will not be launched until Siemens Energy replaces the faulty equipment. Over the weekend, Siemens said it had not been asked to do the job and reiterated that sanctions would not prohibit maintenance. Despite the dismal Germany data and heightened concerns over a deepening energy crisis in Europe, EUR/USD rises toward parity, supported by the improving market mood.

USD/JPY extended its rally on rising US yields and climbed to its highest level in over two decades above 141.00 on Tuesday. The data from Japan showed that Overall Household Spending rose by 3.4% on a yearly basis in July, missing the market expectation of 4.2%. Commenting on the market developments, “I have the impression that recent forex moves are becoming more significant," Japanese Finance Minister Shunichi Suzuki said on Tuesday.

Liz Truss won the Conservative Party leadership race to become the next British Prime Minister on Monday, as expected. "I will deliver a bold plan to cut taxes and grow our economy," Truss said during her acceptance speech. After having touched its weakest level since March 2020 at 1.1443 on Monday, GBP/USD staged a decisive rebound and was last seen rising 0.75% on the day at 1.1600.

Gold started the second day of the week on a firm footing and advanced to a fresh weekly high of $1,726. With US T-bond yields starting to edge higher during the European session, however, XAU/USD erased a large portion of its daily gains and was last seen trading at around $1,715.

Bitcoin continues to fluctuate in an extremely narrow range below $20,000 and Ethereum clings to modest daily gains above $1,600 in the European morning on Tuesday.