Forex Today: Dollar the strongest as risk aversion rules

FXStreet Team FXStreet

Here is what you need to know on Monday, April 6th:

Risk aversion leads the way. The coronavirus pandemic continues to take its toll on economic developments, with the US losing 701,000 jobs’ positions in March, much worse than anticipated. The unemployment rate in the country jumped 1 full digit from 3.4% to 4.4%. The final readings of March Services PMI for most major economies suffered downward revisions to record lows.
The US Federal Reserve announced on Friday it would dial back the daily pace of bond-buying to $50 billion a day starting this week, down from the initial buying of $75 billion, a positive sign toward some financial stability.
The coronavirus continues to spread. The US is the epicenter of the pandemic, with over 310,000 cases reported from a global total of 1.22 million. The death toll is at 66,500. At some point, these numbers will become irrelevant, amid the uneven proportion of the tested population in each nation.
The American currency appreciated against its major rivals last week, as it’s still the preferred safe-haven, followed by gold. The US ISM Non-Manufacturing PMI was upbeat in March, printing at 52.5, backing the dollar’s momentum ahead of the close.
The shared currency remains the weakest, while the Pound is the most resilient to the dollar’s demand. The EUR/USD pair is under pressure around 1.0800 while GBP/USD trades below the 1.2300 threshold, at risk of extending its slump.
Commodity-linked currencies ended the week with losses, despite oil and gold settled at weekly highs. Spot gold closed the week at $1,616.20 a troy ounce, while WTI ended at $28.50 a barrel, a two-week high.
Cryptocurrencies spent the weekend consolidating in tight ranges near their recent multi-week highs.

Author

FXStreet Team

FXStreet

Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.

AUD/USD battles 0.7000 amid bullish USD

AUD/USD keeps its offered tone intact near 0.7000 at the start of a new week, trading near its lowest level since August 4 amid a bullish US Dollar. US yields hold near multi-year highs amid inflation risks from higher oil prices and rising bets on an October Fed rate hike. This, along with the US-Iran standoff, continues to underpin the safe-haven buck and weigh on the pair ahead of Tuesday's RBA policy announcements.

USD/JPY climbs back toward 158.00 after BoJ minutes amid firm USD

USD/JPY finds dip-buyers and reverses part of Friday's slide driven by speculation that authorities will step in again to prop up the Japanese Yen. However, the BoJ's dovish Minutes cap the JPY. Meanwhile, the US Dollar regains traction as the US-Iran standoff supports crude oil prices, fueling inflation fears and reaffirming bets for an October Fed rate hike. This further supports the pair, driving it back toward 158.00.

Gold slides to $4,200 on Fed hike bets and Iran risks

Gold falls hard at the start of a new week, sliding back closer to $4,200 and the lower boundary of the monthly range. Firming October Fed rate-hike bets, along with oil-driven inflation risks, keep US bond yields elevated near multi-year highs, helping the US Dollar regain positive traction amid persistent Iran risks. These factors weigh heavily on the bullion.

Week ahead: Rate hike bets face a crucial data week

Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.

After the Trump Xi summit, markets are trading three clocks

The summit delivered time, not a deal. Trade, oil and chips now each run to a date, and the macro backdrop matters more than the pageantry. Markets wanted a deal and got a calendar date instead. Xi Jinping left Washington on Friday after tea at the White House and a tour of the National Archives.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.