Dollar Rebounds, Forex Markets Turn Cautious

Following another positive day, markets were wary, pushing the dollar up but everything else down. Federal Reserve Chairman Jerome Powell said the recovery is patchy and supply problems seem to slow US growth. Cryptocurrencies, gold as well as oil were all struggling. 

Despite a slide in Treasury yields, the US dollar was gaining ground across the board. Returns on 10-year bonds were around 1.61%. 

Powell poured cold water on the recovery and stressed that low-income people were still struggling to return to work. John Williams, the Fed Chair’s colleague also said that the US economy has a long way to go. 

The US ISM Manufacturing Purchasing Managers’ Index (PMI) disappointed with 60.7 points. Comments showed that companies were struggling with higher prices and supply chain issues. For March, factory orders figures are on the agenda. 

The EUR/USD pair was changing hands closer to 1.20 as the EU was considering lifting some travel restrictions. GBP/USD was battling 1.39 ahead of Markit’s final Manufacturing PMI for April. 

AUD/USD Momentum Shifts to the Downside

Elsewhere, the Reserve Bank of Australia’s hawkish pivot was not able to provide the Australian Dollar with a sustained lift. TD Securities economists think momentum is now shifting to the downside in the near term. This is with a deteriorating technical backdrop and an inability to benefit from cross-asset support.

At its May meeting, the RBA kept all of its policy settings unchanged, as widely expected. That said, the central bank still managed to surprise investors. 

Policymakers upgraded all key forecasts more than the markets anticipated. They stated the decision on the Yield Curve Control (YCC) Target bond and QE will be made at the policy meeting scheduled for July 6th. They were expecting this to come in August. 

The RBA left its interest rate unchanged at 0.1%. It said it would consider changes to its bond-buying scheme in its July meeting. AUD/USD was trading above 0.77, yet below the highs.

In cryptocurrencies, Bitcoin was trading around $56,000 after dropping to lower levels. Ehtereum was consolidating its gains above $3,300. XRP fell below $1.48. 

On the vaccine front, the U.S. could approve jabbing 12 to 15-year-old people with the Pfizer/BioNTech vaccine, raising the chances to reach herd immunity. 

The pace of immunizations is slowing down and the United States is pressured to contribute excess inoculations to other countries. Moreover, New York will take steps to return to normal.