Forex Today: US Dollar holds ground after Powell interview, eyes on PMI data

Here is what you need to know on Monday, February 5:

The US Dollar (USD) stays resilient against its rivals to start the week following Friday's impressive upsurge. Souring market mood on escalating geopolitical tensions and Federal Reserve (Fed) Chairman Jerome Powell's hawkish remarks provide further support to the currency as market focus shifts to the ISM Services PMI report. 

The USD Index (DXY) gained nearly 1% on Friday after the monthly report published by the Bureau of Labor Statistics showed that Nonfarm Payrolls rose by 353,000 in January, surpassing the market expectation of 180,000 by a wide margin. In a televised interview with CBS News’s 60 Minutes early Sunday, Powell repeated that the March policy meeting was likely too soon to have the confidence to start cutting rates. He also reiterated that they could move sooner if they saw labor market weakness or inflation coming down persuasively. The DXY pushed higher and touched its strongest level since early December above 104.00 in the early trading hours of the Asian session before retreating slightly into the European morning. 

Meanwhile, geopolitical tensions remain high at the beginning of the week following news of the US and the UK conducting a new wave of airstrikes on the Iran-backed Houthi militant group in Yemen over the weekend, hitting at least 30 targets. In retaliation, Yemen’s Houthi rebels vowed to extend their military operations and threatened to respond to the latest set of strikes. Reflecting the risk-averse market atmosphere, US stock index futures are down about 0.25% early Monday.

EUR/USD declined sharply on Friday and closed the third consecutive week in negative territory. The pair was last seen trading in a tight channel below 1.0800. HCOB will release revisions to January Services and Composite PMIs for Germany and the Eurozone.

GBP/USD continues to push lower toward 1.2600 after losing 0.9% on Friday. Bank of England Chief Economist Huw Pill will participate in an online Q&A at 17:30 GMT on Monday.

USD/JPY stretched higher in the Asian session on Monday and came within a touching distance of 149.00, setting its highest level since late November in the process. With the JPY benefiting from the souring risk mood, however, the pair retreated below 148.50.

Gold erased a large portion of its weekly gains on Friday as the benchmark 10-year US Treasury bond yield recovered above 4% after strong US labor market data. With the 10-year yield staying in positive territory early Monday, XAU/USD trades in the red at around $2,030.