Forex News
BNY’s Bob Savage reports that the Dollar Index is firmer as higher U.S. yields and renewed geopolitical tensions underpin safe-haven demand. President Trump’s proposal for broad new tariffs raises trade and inflation risks, reinforcing USD support. Savage also highlights iFlow data showing FX inflows into USD and risk-off positioning in bonds and equities.
Tariff risks bolster Greenback
"President Trump has proposed new tariffs of at least 10% on imports from 60 trading partners, following a forced labor investigation and as part of a wider effort to rebuild the tariff wall previously struck down by the Supreme Court. The Office of the U.S. Trade Representative said Canada, Mexico, the EU, Taiwan and the U.K. would face a 10% rate, while goods from major economies such as China, India, Japan, South Korea, Brazil and Switzerland would be hit with 12.5%. The levies are not immediate and will undergo public comment and hearings before finalization, leaving room for changes."
"The move has heightened trade tensions and raised inflation risks. Outflows were concentrated in DKK, CAD, NZD and TRY, followed by BRL and CLP. In contrast, inflows favored USD, JPY, MXN and ZAR, along with EUR and GBP."
"iFlow Mood has stabilized as June has got underway but remains firmly in risk-off territory, characterized by continued equity outflows and sustained demand for core government bonds."
"The third day of oil price rises has left global shares lower and U.S. equity futures weaker. The escalation in the U.S.-Iranian conflict has again been the driving force, pushing bond yields and USD higher. The economic data produced mixed results: China’s services PMI rose to a three-month high, while Australian Q1 GDP was softer than expected."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The Australian Dollar weakens after Australian GDP growth misses expectations in the first quarter.
- The US ISM Services PMI accelerates more than expected in May, supporting the US Dollar.
- Middle East geopolitical tensions and rising inflation components in the ISM survey further underpin the Greenback.
AUD/USD trades around 0.7145 on Wednesday at the time of writing, down 0.50% on the day. The pair remains under pressure after the release of several disappointing Australian economic indicators, while solid US data continues to support the US Dollar (USD).
The Australian economy expanded by 0.3% QoQ in the first quarter, down from a revised 0.9% in the previous quarter and below market expectations of 0.5%. On an annual basis, Gross Domestic Product (GDP) grew by 2.5%, missing the consensus forecast of 2.7%. The figures confirm a loss of economic momentum and reinforce expectations that the Reserve Bank of Australia (RBA) will maintain a cautious policy stance.
Investors have also digested a rise in Australia’s Unemployment Rate to its highest level in about four and a half years, alongside softer recent inflation data, reducing the need for further monetary tightening. UOB expects the central bank to keep its cash rate at 4.35% for an extended period, while TD Securities believes one final 25-basis-point rate hike remains possible later this year as growth continues to run above potential.
In the United States (US), data released on Wednesday supports the Greenback. The Institute for Supply Management (ISM) reported that its Services Purchasing Managers Index (PMI) rose to 54.5 in May from 53.6 in April, beating market expectations of 53.8. The Prices Paid component also increased to 71.3 from 70.7, signaling that inflationary pressures remain elevated.
These figures largely offset the slight disappointment from the S&P Global Services PMI, which was revised down to 50.7 in May from the initial release of 50.9. Meanwhile, the Automatic Data Processing (ADP) report showed that US private employment increased by 122K jobs in May, above expectations of 117K, highlighting the continued resilience of the labor market.
The geopolitical backdrop also remains supportive of the Greenback. Concerns surrounding tensions between the United States and Iran continue to boost demand for safe-haven assets. US President Donald Trump stated that Iran has agreed not to acquire nuclear weapons, while noting that discussions with Iranian authorities remain ongoing.
The strength of the US Dollar, fueled by robust US economic data and a risk-averse market environment, continues to dominate market sentiment and keeps downward pressure on AUD/USD.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.27% | 0.28% | 0.02% | 0.23% | 0.49% | 0.83% | 0.37% | |
| EUR | -0.27% | 0.00% | -0.26% | -0.04% | 0.23% | 0.55% | 0.11% | |
| GBP | -0.28% | -0.00% | -0.26% | -0.05% | 0.22% | 0.53% | 0.10% | |
| JPY | -0.02% | 0.26% | 0.26% | 0.19% | 0.46% | 0.76% | 0.34% | |
| CAD | -0.23% | 0.04% | 0.05% | -0.19% | 0.27% | 0.59% | 0.15% | |
| AUD | -0.49% | -0.23% | -0.22% | -0.46% | -0.27% | 0.32% | -0.14% | |
| NZD | -0.83% | -0.55% | -0.53% | -0.76% | -0.59% | -0.32% | -0.43% | |
| CHF | -0.37% | -0.11% | -0.10% | -0.34% | -0.15% | 0.14% | 0.43% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
(This story was corrected on June 3 at 15:55 GMT to say that the Australian GDP was down from a revised 0.9% in the previous quarter, not 0.8%.)
Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) remains soft but broadly stable, with USD/CAD trading near 1.3850. They highlight that CAD is undervalued versus their fair value estimate around 1.3690, but recent shifts in Bank of Canada (BoC) expectations and wider short-term spreads favour the US Dollar (USD). They see USD/CAD upside as limited toward the mid-1.38s unless a fresh CAD-negative catalyst emerges.
CAD undervaluation but capped USD/CAD gains
"The CAD is soft but little changed this morning. The CAD is “cheap” relative to our fundamental fair value assessment (1.3690 today) but factors have moved against the CAD through May as markets have repriced the BoC policy outlook somewhat and short-term spreads have widened in the USD’s favour."
"More broadly, the CAD remains hampered but the uncertain trade outlook. The weak CAD valuation and a generally stretched-looking USD suggest limited upside potential for USD/CAD absent a new, CAD-negative catalyst."
"Bearish—While the USD has edged a little higher this week so far, chart signals from last week remain clearly bearish (a daily key reversal signal last Thursday and a weekly “shooting star” candle signal)."
"USD gains to the mid-1.38s are meeting resistance, as expected, but there is admittedly no sign of a turn lower developing just yet."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold falls as strong US economic data and Middle East uncertainty lift the US Dollar.
- Markets price in a higher-for-longer Fed interest rate outlook as elevated Oil prices add to inflation concerns.
- Technical signals continue to point lower as XAU/USD struggles to regain momentum.
Gold (XAU/USD) trades lower on Wednesday as escalating tensions in the Middle East dampen hopes for a near-term US-Iran peace deal, while a fresh batch of upbeat US economic data reinforces expectations that interest rates could stay higher for longer. At the time of writing, XAU/USD is trading around $4,447, down nearly 2.0% so far this week.
ADP data showed private payrolls rose by 122K in May from 105K in April, beating expectations of 117K and marking the strongest increase since March 2025. Meanwhile, the ISM Services Purchasing Managers Index (PMI) climbed to 54.5 from 53.6, above forecasts of 53.8.
The US Dollar extended its intraday advance following the latest data releases. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 99.45, up 0.25% on the day. Traders now look ahead to the US Nonfarm Payrolls (NFP) report due on Friday.
On the geopolitical front, US Central Command said American forces intercepted multiple Iranian ballistic missiles and drones targeting Kuwait and Bahrain on Tuesday. In response, US forces carried out strikes on an Iranian military ground control station on Qeshm Island in the Strait of Hormuz.
Meanwhile, US President Donald Trump pushed back against reports from Iran's Fars and Tasnim news agencies that talks had stalled.
Trump said on Wednesday that Iran had agreed not to have a nuclear weapon, Reuters reported. He also said Iran’s Supreme Leader, Ayatollah Mojtaba Khamenei, is involved in talks with the United States.
Traders continue to favor the US Dollar (USD) as negotiations between Washington and Tehran remain unclear and tensions in the Middle East persist, while the blockade around the Strait of Hormuz keeps Oil prices elevated.
The current macro backdrop has put Gold’s traditional defensive appeal under pressure as markets increasingly focus on the inflationary impact of higher energy prices.
As a result, traders now expect the Federal Reserve (Fed) to keep interest rates unchanged through the rest of the year, while pricing in a roughly 40% chance of a 25-basis-point (bps) rate hike at the December meeting.
A higher-interest-rate environment tends to reduce the appeal of non-yielding assets such as Gold. The hawkish repricing is also lending additional support to the US Dollar and pushing Treasury yields higher, adding further pressure on the precious metal.
Technical Analysis: XAU/USD trades in the lower end of its recent range
On the daily chart, XAU/USD holds below the Bollinger Bands Simple Moving Average (SMA) midpoint at roughly $4,568, keeping the near-term tone bearish as price gravitates toward the lower half of the recent volatility envelope.
The Relative Strength Index (RSI) around 39 suggests subdued bullish momentum rather than outright oversold conditions, while the Average Directional Index (ADX) near 25 hints at a trend that is gaining strength but is not yet in a strongly directional phase.
On the topside, initial resistance is aligned with the Bollinger Bands SMA center line near $4,568, with the upper band next around $4,752 acting as a secondary cap if buyers attempt a rebound.
On the downside, the lower Bollinger band near $4,384 offers the first notable support, and a clear break beneath this zone would open the door to deeper corrective losses as the broader volatility structure shifts lower.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
MUFG’s Derek Halpenny notes that recent Ministry of Finance (MoF) and Bank of Japan (BoJ) intervention failed to prevent USD/JPY from returning to 160, as higher US yields and renewed Middle East tensions support the Dollar. He highlights rising crude Oil risks, stronger speculation for a June BoJ rate hike, and stresses that BoJ action should cap further USD/JPY gains, with upside seen as limited.
BoJ tightening expected to cap yen losses
"The largest single month of intervention by the MoF/BoJ (JPY 11.7trn) has had a brief impact on the yen highlighted by the fact that USD/JPY traded the 160-level today for the first time since intervention took place, probably on 30th April & 6th May. The success of intervention is always determined by whether the fundamental backdrop can reinforce the intervention – and that hasn’t happened."
"Although the price of crude oil has fallen since intervention took place, it is on the rise again and the continued reports of escalation in military conflict is placing some serious doubts over the prospects of a near-term reopening of the Strait of Hormuz. We could be close to a tipping point that sees some renewed sharp increases in crude oil prices."
"The BoJ at least, now looks to be trying to play its part in providing yen support. The OIS pricing for a rate hike on 16th June has increased by about 5-6bps since intervention took place with the probability of a hike now over 80% and the highest since mid-April."
"We expect the BoJ to hike although US yields will remain important and USD/JPY could still gain although BoJ action will help contain any move. We still see upside USD/JPY scope as limited to a few big figures."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Federal Reserve (Fed) Bank of New York President John Williams said on Wednesday that higher energy prices are driving up costs and inflation, per Reuters.
Key takeaways
"Economy has solid growth around 2%, job market has stabilized."
"The job market is healthy."
"Inflation is up quite a bit."
"I would expect inflation to peak in the next few months."
"Inflation should be elevated through remainder of year."
"Inflation is elevated in goods sector and energy related forces."
"Inflation also elevated in tech due to AI."
"A lot of infaltion is due to tariffs and inflation and computer chips."
"Hopefully energy prices will stabilize."
"I'm not that worried about persistent impacts on inflation so far."
"Not expecting long running increase in energy prices."
"Will have to wait and see what happens with latest tariff moves."
"Monetary policy is exactly in the right place, no need to raise or lower rates."
"Upside risks to inflation have increased."
"I don't see an obvious argument to change interest rates right now."
Market reaction
The US Dollar Index continues to edge higher in the American session on Wednesday and it was last seen rising 0.2% on the day at 99.42.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- USD/CHF rises for a third straight day as stronger US labor data supports the US Dollar.
- Traders await Friday’s US Nonfarm Payrolls report after upbeat ADP and JOLTS data.
- SNB’s Schlegel says the central bank stands ready to intervene against excessive Franc strength.
USD/CHF extends its advance on Wednesday as ongoing tensions in the Middle East and stronger-than-expected US labor data lift the US Dollar (USD). At the time of writing, the pair is trading around 0.7900, staying on the front foot for a third straight day.
The latest ADP report showed US private payrolls rose by 122K in May from 105K in April, topping market expectations of 117K. It was also the highest level since March 2025.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 99.47, near the upper end of its recent range and up 0.25% on the day.
Recent labor data suggests the US job market is regaining momentum after last year’s cooling trend. JOLTS Job Openings data released on Tuesday also surprised to the upside, showing the highest level of job openings since May 2024.
Meanwhile, the final reading of the US S&P Global Services Purchasing Managers Index (PMI) eased to 50.7 in May from 50.9 in April, missing market expectations of 51. However, the ISM Services PMI rose to 54.5 in May from 53.6 in April, beating forecasts of 53.8.
Attention now turns to the US Nonfarm Payrolls (NFP) report due on Friday. Analysts expect the US economy to add 85K jobs in May after a 115K increase in April.
A stronger-than-expected reading could further support hawkish Federal Reserve (Fed) expectations as markets remain concerned about inflation risks linked to higher Oil prices.
On the Swiss side, traders await Switzerland’s Consumer Price Index (CPI) data due on Thursday. Annual inflation is expected to rise to 0.8% in May from 0.6% in April.
SNB Chairman Martin Schlegel said on Thursday that medium-term inflation pressures remain broadly unchanged and reiterated that the central bank stands ready to intervene in FX markets to counter excessive Swiss Franc (CHF) strength. He also warned that the Iran war could increase pressure on the Franc.
On the geopolitical front, traders are closely watching whether Washington and Tehran can reach a deal to end the war after tensions escalated again this week. US President Donald Trump denied reports that talks had stalled and said Iran had agreed not to have a nuclear weapon, Reuters reported on Wednesday.
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
Business activity in the United States (US) service sector expanded at an accelerating pace in May, with the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) rising to 54.5 from 53.6 in April. This reading came in better than the market expectation of 53.8.
Other details of the report showed that the Prices Paid Index, the inflation component, rose to 71.3 from 70.7 in this period, while the Employment Index edged lower to 47.9 from 48.
Assessing the survey's findings, "business activity hit its second highest reading since achieving the same reading of 57.7 percent in October 2024, and the New Orders and Supplier Deliveries indexes hit their third highest readings in that time frame," said Steve Miller, Chair of the ISM Services Business Survey Committee.
"The Employment index, however, hit its second lowest reading since September 2025, 0.5 percentage point below its 12-month average. Respondents commented frequently that their companies had instituted hiring freezes or were not backfilling vacated positions, however, most industries reported that they were holding flat in employment month over month," Miller added.
Market reaction to ISM Services PMI
The US Dollar (USD) preservers its strength following this report. At the time of press, the USD Index was up 0.23% on the day at 99.45.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.45% | 0.23% | 0.38% | 0.52% | 0.40% | 1.61% | 1.17% | |
| EUR | -0.45% | -0.23% | -0.07% | 0.07% | -0.05% | 1.18% | 0.71% | |
| GBP | -0.23% | 0.23% | 0.19% | 0.30% | 0.18% | 1.41% | 0.93% | |
| JPY | -0.38% | 0.07% | -0.19% | 0.16% | 0.05% | 1.24% | 0.76% | |
| CAD | -0.52% | -0.07% | -0.30% | -0.16% | -0.14% | 1.08% | 0.62% | |
| AUD | -0.40% | 0.05% | -0.18% | -0.05% | 0.14% | 1.24% | 0.77% | |
| NZD | -1.61% | -1.18% | -1.41% | -1.24% | -1.08% | -1.24% | -0.48% | |
| CHF | -1.17% | -0.71% | -0.93% | -0.76% | -0.62% | -0.77% | 0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the ISM Services PMI data for May at 06:00 GMT.
- The US ISM Services PMI is expected to tick higher in May, up from the 53.6 posted in April.
- Investors will pay attention to the Prices Paid and Employment subindexes ahead of the Fed meeting.
- EUR/USD is in a wait-and-see mode ahead of data, war headlines.
The Institute for Supply Management (ISM) is scheduled to release the May Services Purchasing Managers Index (PMI) on Wednesday. Market participants anticipate a modest improvement, with the index forecast at 53.8, up from 53.6 in April.
The index is a trusted measure of the health of the United States (US) services sector, closely followed by market participants. It is based on a survey conducted by ISM among companies across the US and revolves around the 50 threshold: a reading above it indicates expansion, while a reading below it indicates contraction.
What to expect from the ISM Services PMI report?
The April ISM report showed that economic activity in the services sector remained in expansion territory for the 22nd consecutive month, yet eased from the 54.0 posted in March. Reading employment, “activity in the services sector remained in contraction in April for a second month in a row. The Employment Index registered 48, up from the March figure of 45.2,” while below its 12-month average of 48.6.
The Prices Paid Index, which is directly linked to inflation, registered 70.7, unchanged from March, raising its 12-month average from 67.2 to 67.7, the highest average reading since May 2023.
“There were several comments from respondents stating that they have yet to see petroleum price increases impacting petroleum-related products, so we expect to see continued elevated readings for the Prices Index for several months — regardless of when the conflict in Iran ends — due to these costs working their ways through global supply chains,” the official report adds.
The Employment and Prices Paid indexes are relevant, as they provide early clues on data that shape the Federal Reserve’s (Fed) monetary policy path. The central bank features a new Chair, Kevin Warsh, who will preside over his first monetary policy meeting in mid-June. Warsh was selected by US President Donald Trump to serve as Chair, aiming for a more “friendly” Chair who would not oppose his desire for lower interest rates.
President Trump, however, is also responsible for the ongoing war in Iran, which has brought back inflationary pressure, making it difficult for the Fed to cut interest rates. Quite the opposite: speculative interest keeps betting on potential interest rate hikes before the year is over as inflation is nearly double the central bank’s 2% goal.
The Personal Consumption Expenditures (PCE) Price Index, the Fed’s favorite inflation gauge, climbed to 3.8% YoY in April from 3.5% YoY in March, as expected. The core annual PCE Price Index, which excludes volatile food and energy prices, rose 3.3%, also meeting the market’s expectations.
Additionally, the US will release the May Nonfarm Payrolls (NFP) report on Friday, and the employment sub-component from the ISM Service PMI could provide clues on how hiring performed in May.
The headline reading will trigger the initial market reaction. As previously mentioned, a reading above the 50 threshold will be considered positive, although the US Dollar (USD) would surge on a better-than-anticipated outcome, as it would signal economic progress and increase the odds of an upcoming interest rate hike.
A reading above 50 yet below expectations could have a modest negative impact on the Greenback. A surprise reading below the critical threshold, however, will fuel concerns about US economic growth and put the USD under selling pressure.
When will the ISM Services PMI report be released and how could it affect EUR/USD?
The ISM Services PMI report is scheduled for release at 14:00 GMT on Wednesday. Ahead of the release, the US Dollar (USD) is under modest selling pressure, pretty much stable as market participants await news from the Iran war front. Hopes for an agreement are slowly fading as tensions between Israel and Lebanon have interrupted talks between the US and Iran to reach a Memorandum of Understanding (MOU).
Valeria Bednarik, FXStreet Chief Analyst, notes: “The EUR/USD pair trades at around 1.1640, little changed on a weekly basis, holding on to familiar levels. The technical picture for the pair is bearish, though directional momentum is lacking. In the daily chart, the pair develops below all its moving averages, which, anyway, are pretty much directionless and confined to a 40-pip range. At the same time, technical indicators head nowhere below their midlines, reflecting directional uncertainty.”
Bednarik adds: “The war is still the main market driver, although the ISM report could introduce some near-term action. As previously noted, an upbeat report should boost demand for the Greenback and send EUR/USD toward its recent lows in the 1.1580 region. If war-related headlines, in the meantime, trigger risk-aversion, the pair could extend its slump toward the 1.1530 price zone. The opposite case is also valid, with a discouraging ISM Services PMI outcome pushing EUR/USD higher, toward the 100-day SMA at around 1.1690. Finally, a discouraging report alongside renewed hopes for a war ending can push the pair up to 1.1740 and beyond.”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Economic Indicator
ISM Services PMI
The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector, which makes up most of the economy. The indicator is obtained from a survey of supply executives across the US based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that services sector activity is generally declining, which is seen as bearish for USD.
Read more.Next release: Wed Jun 03, 2026 14:00
Frequency: Monthly
Consensus: 53.8
Previous: 53.6
Source: Institute for Supply Management
The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) reveals the current conditions in the US service sector, which has historically been a large GDP contributor. A print above 50 shows expansion in the service sector’s economic activity. Stronger-than-expected readings usually help the USD gather strength against its rivals. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are also watched closely by investors as they provide useful insights regarding the state of the labour market and inflation.
(This story was corrected on June 3 at 14:45 GMT to say in the title that the ISM Services PMI rose to 54.5 in May, not 54.4.)
ING’s Padhraic Garvey and Michiel Tukker stress that Eurozone real rates are increasingly driven by structural forces such as fiscal expansion and record bond supply. They point to rising 10Y euro implied real rates since 2024, helped by German spending plans. They warn that growth worries or recession risks could quickly reverse the current upward pressure on Eurozone real yields.
Euro real rates lifted by structure
"Inflation is clearly the current driving force behind euro rates, but the dynamics behind real rates should also not be forgotten when looking over a longer horizon. When we look at the 10Y euro implied real rate, we are close to the starting point from before the rise in oil prices. But when we take a longer view, we see that 10Y real rates have risen significantly since 2024."
"Part of the real rate story can be explained by improving growth expectations in the eurozone, whereby a fiscal boost can help reduce the chance of returning to secular stagnation. In the US, the AI story seems to be feeding a growth narrative most recently. Whilst 10Y euro real rates traded sideways over the past few months, US real rates actually rose significantly."
"But the big elephant in the room is the record bond supply hitting markets, which can also have an upward impact on longer-dated real rates. With the ECB continuing to reduce their bond portfolio, investors have increasingly more interest rate risk to absorb, increasing the term premium. And in the US, a worrisome large fiscal deficit is also adding to the global bond supply, keeping curves steeper."
"Whilst oil prices dominate daily moves, in the background we could see a continuation of upward pressure on global real rates. This could change, however, if growth worries start mounting. Both the US and eurozone economies have their weaknesses and any talk about recession risks would quickly turn the direction of real rates."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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