Forex Today: Dollar reigns in a risk averse environment and ahead of central banks’ announcements

What you need to take care of on Tuesday, May 3:

The  American Dollar benefited from a poor market mood, ending the day higher against most major rivals. The dismal sentiment was the result of a combination of mounting tensions between Russia and Europe, downbeat macroeconomic figures, and concerns related to aggressive central banks, as the RBA, the US Federal Reserve and the BOE are set to announce monetary policies this week.

The German Economy Minister Robert Habeck noted that there is still no unity among EU member states on an oil embargo on Russia, although Finance Minister Christian Lindner added that it is still possible. At the same time, European Central Bank vice-president Luis de Guindos said that a rate hike in July is possible, although unlikely. The EUR/USD pair edged lower and traded around the 1.0500 level.

US data mixed expectations. The official ISM Manufacturing index printed at 55.4, much worse than the 57.6 expected. Nevertheless, Wall Street remained pressured for most of the session, although it ended the day mixed, as the DJIA and the Nasdaq managed to close with gains.

The GBP/USD pair settled around 1.2480, while AUD/USD trades at round 0.7050 ahead of the RBA. The central bank is expected to raise rates by 15-25 bps, pulling the trigger for the first time in over a decade.

The USD/CAD pair settled at 1.2870, despite higher oil prices. WTI ended the day at around $105.60  a barrel.

Safe-haven CHF and JPY shed ground vs the dollar, as well as Gold. The bright metal currently trades at around $1,860 a troy ounce.

Restrictions in China due to coronavirus extended in Beijing, further fueling concerns about global growth. The official Chinese NBS PMIs released over the weekend indicated a sharp economic contraction in April.

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