US Dollar sees April's ISM Services data save the day

NEW YORK (May 5) The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, edges lower to Friday's low around 99.62 at the time of writing on Monday, after the Taiwan Dollar (TWD) surges over 5% and triggers a spillover effect in Asian currencies against the Greenback. It is the biggest intraday gain in over three decades, on speculation that exporters are rushing to convert their holdings of US Dollars to the island’s currency, according to Bloomberg. All this occurs in a very illiquid market with several Asian countries, such as China, and the United Kingdom, closed for a public holiday. 

The move opens up an interesting element in the tariff talks that are taking place between the United States (US) and Taiwan. One of the reasons exporters are buying Taiwan Dollars is that they expect the authorities will allow the currency to appreciate to help reach a trade deal with the US. Taiwan’s government said Saturday its negotiation team had conducted the first round of meetings with the US on May 1, though no details were released.

Daily digest market movers: ISM helps soften the blow

• The Monday press conference from the Taiwan central bank was a panic call from its governor Yang Chin-long. “We solemnly urge market commentators not to speculate irresponsibly about the foreign exchange market, as such comments can destabilize the market and potentially impact the broader economy” the governor commented, Bloomberg reports.
• On Sunday, US President Donald Trump suggested that his administration could strike trade deals with some countries as soon as this week, offering the prospect of relief for trading partners seeking to avoid higher US import duties, Reuters reported. 
• The European Union is set to propose measures to ban Russian Gas imports by the end of 2027, as the bloc pushes to sever ties with the country that was once its biggest energy supplier, Bloomberg reports. 
• Japan's Finance Minister Katsunobu Kato said the country will not use the sale of its US Treasury holdings in trade talks with the Trump administration, retracting earlier statements from last week, Bloomberg reports. 
• Israel has started a massive ground offensive that looks to be bearing as goal the full control of the Gaza region.
• Amidst all these headlines and events, the US Dollar is losing territory, with several traders pointing out that the Greenback is no longer considered to be a safe haven for markets, Bloomberg reports.
• At 13:45 GMT, April's final reading of the S&P Global Services Purchase Managers’ Index (PMI) was released. The Services component fell to 50.8, where a steady 51.4 was expected from the preliminary reading.
• The Institute for Supply Management (ISM) has released its April PMI for the Services sector:
• • The Services PMI surged to 51.6, an upbeat surprise from the expected 50.6, coming from 50.8 in March.
  • The Services New Orders Index jumped to 52.3, coming from 50.4 and the Services Employment Index came in at 49, beating the 46.2 in March. 
• Equities are seeing some recovery in the US equities on the back of those upbeat ISM readings, with the Nasdaq down by 0.70%. In Europe the German Dax is set to close up around 1.00% on the day.
• The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in May's meeting stands at 3.2% against a 96.8% probability of no change. The June meeting sees a 31.8% chance of a rate cut.
• The US 10-year yields trade around 4.35%, erasing past weeks’ softening as traders have even priced out the chances for a June rate cut. 

FXStreet