The US dollar remained rangebound on Monday amid a cautious atmosphere as tensions in the Middle East continue.
Fresh military exchanges over the weekend underscored the fragility of the current ceasefire and highlighted the risks facing any long-term agreement.
The uncertainty could continue to fuel demand for the dollar as a safe-haven asset and could keep bond yields elevated.
Markets could also focus on the busy week of economic releases ahead that could shape the outlook for the Federal Reserve’s monetary policy.
For now, the dollar remains supported by expectations that the Fed will maintain a cautious stance. The central bank is anticipated to keep interest rates unchanged in the short-term, although a hike remains a possibility later on, in particular if inflationary pressures stay elevated. The latter could maintain upward pressure on yields.
Attention now turns to today’s ISM Manufacturing PMI, which will provide a read on business conditions in May. The report will be followed by JOLTS job openings, ISM Services, and Friday’s non-farm payroll data. Together, they could significantly influence expectations for growth, inflation, and the future direction of both Treasury yields and the dollar.
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