The US dollar strengthened as the ISM services report showed a significant increase, reaching its highest level since February 2023. However, there was a slight concern as the employment indicator dropped below 50, just before the upcoming non-farm payrolls report.
On the other hand, the British pound faced selling pressure following a dovish statement from Bailey, combined with growing tensions in the Middle East. Oil prices surged over 5% after Biden mentioned discussions about potential Israeli attacks on Iran’s oil facilities. Although this message was misinterpreted, the oil market remained volatile due to uncertainty surrounding Israel’s actions. Despite this, oil traders are nervous as there is a significant short position in the market.
The Canadian dollar didn’t benefit much from the rise in oil prices but outperformed the Australian and New Zealand dollars. This can be attributed to fading enthusiasm over China’s stimulus measures in Hong Kong markets.
Stock markets did not show much risk aversion, partly due to positive comments from Nvidia that boosted the AI sector. The USD/JPY pair traded sideways during North American trading hours after a strong rally the previous day.
In other news, Italy is considering implementing a windfall tax on companies to reduce its budget deficit. This move could have implications for the Italian economy and business sector.
Overall, the financial markets are reacting to various global events, including economic reports, political tensions, and potential geopolitical conflicts. Traders and investors are closely monitoring these developments to make informed decisions in the current market environment.
