USD Index Treads Water as Traders Remain Cautious Ahead of US Nonfarm Payrolls Release

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The USD Index is currently hovering around the 101.60 region, with market participants taking a cautious approach ahead of the release of US Nonfarm Payrolls later this week. The dollar has been under pressure in recent weeks and is trading in the area of multi-week lows, which is attributed to the broad-based improvement in the risk-associated universe and expectations of a pause by the Fed at the May event. The market consensus among traders remains divided, and CME Group's FedWatch Tool currently predicts a 55% probability that the Fed could leave rates unchanged at the May 3 gathering.

The focus for the USD Index remains on the data releases, with MBA Mortgage Applications due in the first turn followed by Balance of Trade, the final Services PMI, and the ISM Non-Manufacturing. In addition, the persistent debate over a soft/hard landing of the US economy, the terminal interest rate near the peak vs. speculation of rate cuts in 2024, and the US-China trade conflict are also weighing on the current bearish outlook for the dollar.

Looking ahead, the market will closely watch the upcoming data releases and any new developments around the Fed's tightening stance. The key events in the US this week include Initial Jobless Claims on Thursday and Non-Farm Payrolls, Unemployment Rate, and Consumer Credit Change on Friday. Traders will also keep an eye on the geopolitical effervescence, particularly with regards to Russia and China.

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