The US dollar bulls uninspired (Daily analysis 6.05.2021)

Janet Yellen comments that rates might have to be lifted to avoid overheating the economy and balance the impact of a massive fiscal stimulation that she made earlier this week spooked the markets. The US dollar briefly traded bid on those remarks, but it fails to gain traction as the economic data continue to come in under expectations.

Noteworthy, the Treasury Secretary explained that higher rates were "not something I'm predicting or recommending" and claimed she was the last person to undermine the independence of the Fed. Nonetheless, those remarks could have pushed the dollar much higher if the economic data came in above expectations.

Data point to a decent growth but no overheating

Both ISM indexes that reflect US services and manufacturing activity paint a picture of very decent growth. However, major releases were printed lower than previously, which distracts markets from betting on an imminent change to the extremely dovish Federal Reserve's stance. What is more, the ADP report suggested that job numbers presented were lower than 800K, which clearly complements the view that the recovery's pace is coherent with the FOMC expectations and therefore will not force the monetary authorities to withdraw stimulus earlier. As a consequence, the main currency pair found support around the 1.20 area and has already bounced higher. However, some risk currencies remain on the back foot, like the Polish zloty or the Norwegian krone, which have underperformed since the start of the month.