Forex Today: PMIs in Europe and Fedspeak will do the rounds

On Monday, the US Dollar (USD) surged, reaching new highs due to continued demand for safe-haven assets as fiscal concerns in Europe dampened risk sentiment. The US Dollar Index (DXY) surged, breaching the 102.50 mark for the first time since April 2025, accompanied by a renewed upward trend in US Treasury yields across the yield curve.

The ADP Employment Change Weekly, Balance of Trade figures, the RCM/TIPP Economic Optimism Index, and the API's weekly report on US crude oil inventories were among the economic releases slated for the day. Moreover, Fed officials William and Bowman were scheduled to deliver remarks.

The Euro (EUR) against the US Dollar (EUR/USD) entered its fifth consecutive week of losses, hampered by persistent gains in the USD and heightened fiscal apprehensions in the Eurozone. Germany's Factory Orders data and the S&P Global Construction PMI for both Germany and the euro bloc were set to be released. The euro zone's Retail Sales would also be a focus.

The British Pound (GBP) followed the risk-linked currencies and started the week on the downside, momentarily falling below the 1.3200 level. The S&P Global Construction PMI was the only release released in the UK. Subsequently, USD/JPY hovered just above the 158.00 level, demonstrating a modest daily gain. A 10-year JGB auction was also expected to draw investor attention. Furthermore, the BoJ's Ueda would speak.

The Australian Dollar (AUD) capitalized on Friday's rally, inching towards the psychological 0.7000 mark, despite further USD strength. Westpac would unveil its Consumer Confidence gauge on Tuesday. In Australia, the front-month WTI futures slipped below $90.00 per barrel after a surge in Middle East crude oil exports and a G7 pledge to release diesel and crude oil reserves.

Gold fluctuated near the $4,100 mark as the USD strengthened and US Treasury yields rallied. Born in Argentina, the author, Pablo, has dedicated his college years to focusing on FX markets and trading. AUD/USD held a supportive bias around 0.6970 heading into Tuesday's Asian session. The pair regained momentum after Friday's bounce, targeting the 0.7000 level despite further USD gains.

Looking ahead, Westpac's Consumer Confidence gauge would be published on Tuesday. USD/JPY erased earlier losses and reclaimed the 158.00 mark in the Asian session, trading within a one-week range. Geopolitical tensions remain a key driver of USD strength, despite waning hopes for a Fed rate hike, bolstering the greenback's rebound.

However, further upside could be limited by hawkish BoJ projections and potential intervention risks that could benefit the Japanese Yen. Gold has regained some stability, nearing the $4,150 mark per troy ounce late on Monday. The precious metal's fluctuating price reflects the persistent USD strength and the resurgence of US Treasury yields.

The ECB, accustomed to straightforward inflation responses such as interest rate hikes, now faces an intricate dilemma due to the market already executing part of the tightening, leaving the ECB with a challenging predicament.