Trading sentiment remains mostly quiet as market participants await fresh clues to guide their next moves. In the meantime, investors continue to respond positively to the increasing dovish bias from the U.S. Federal Reserve (Fed)—especially following recent U.S. inflation data—which is pressuring the U.S. Dollar (USD) and supporting riskier assets such as equities, cryptocurrencies, and, to a lesser extent, gold.
Optimism is also boosted by reports of progress in U.S.-led efforts to mediate a ceasefire between Russia and Ukraine. However, several factors still challenge market confidence, including concerns over the Fed’s independence, Russia’s firm demands on retaining acquired territories, and ongoing geopolitical tensions involving Iran, North Korea, and Gaza.
Following the U.S. Consumer Price Index (CPI) data, which suggested no significant inflation threat from U.S. tariffs, both market participants and policymakers increased their calls for interest rate cuts. As a result, a 0.25% rate cut in September is now widely expected, with two additional 0.25% rate cuts projected for the remainder of 2025.
Notably, U.S. Treasury Secretary Scott Bessent has advocated for a larger 0.50% rate cut in September and drew attention by encouraging the Bank of Japan (BoJ) to consider a rate hike—an unusual move. However, several Federal Reserve officials, including Chicago Fed President Austan Goolsbee, Fed Chair candidate James Bullard, and Atlanta Fed President Raphael Bostic, responded with caution to Bessent’s bold suggestions. Despite their reservations, the market continues to anticipate dovish action from the Fed, further weakening the U.S. Dollar.
Separately, some Fed officials like Goolsbee defended the Federal Reserve’s independence, as former President Donald Trump reportedly prepares a lawsuit against current Fed Chair Jerome Powell. The lawsuit reportedly relates to alleged irregularities in the construction of new Federal Reserve buildings, though the broader motive is widely understood to be political.
On the geopolitical front, Donald Trump recently held phone conversations with European Union (EU) leaders and Ukrainian President Volodymyr Zelenskyy, which he described as “10” (positive). According to Axios, Trump indicated the possibility of Ukraine ceding some territory to Russia as part of a peace deal, while also warning Moscow of consequences if it refuses to cooperate. Trump is scheduled to meet Russian President Vladimir Putin in Alaska this week and said, “Going to meet with Putin, then will call Zelenskyy and European leaders.”
Meanwhile, UK Prime Minister Keir Starmer and French President Emmanuel Macron also expressed support for the U.S.-led initiative to end the Russia-Ukraine war, and both indicated readiness to provide military support if required.
In trade developments, a Reuters survey revealed that most Japanese companies welcomed the revised U.S.-Japan trade agreement, which reduced overall tariffs from 25% to 15%, and automotive tariffs from 27.5% to 15%.
In the United Kingdom (UK), the Royal Institution of Chartered Surveyors (RICS) reported that house prices have fallen to a 13-month low, driven by concerns about tax changes and interest rate uncertainty.
The Australian Dollar (AUD) surged after strong U.S. full-time employment growth data followed earlier wage growth figures, encouraging the Reserve Bank of Australia (RBA) to pause further rate cuts after this week’s rate reduction.
In Canada, the Bank of Canada (BoC) released meeting minutes showing policymakers are considering a pause in rate cuts, stating, “Agreed on need to wait for more clarity before firm conclusions.”
Meanwhile, China is preparing to host the Shanghai Cooperation Organization (SCO) summit in Tianjin on August 31 – September 1. The SCO is an intergovernmental organization led by China and Russia. According to Nikkei, the upcoming summit is being dubbed an "Anti-U.S. summit" due to its agenda, which includes discussions on the Russia-Ukraine war and geopolitical divisions intensified by U.S. tariffs imposed by Trump. Over 20 world leaders, including President Putin, are expected to attend, raising market concerns.
Amid all this, the U.S. Dollar Index (DXY) remains under pressure, holding near a two-week low after falling for two consecutive days, which has helped support major currencies, commodities, and Antipodean currencies (such as AUD and NZD).
Cryptocurrencies rallied on expectations of increased institutional investment and technical breakouts, with the total cryptocurrency market capitalization exceeding $4.0 trillion, marking a new record high.
Equity markets also ended higher, led by Cisco Systems reporting better-than-expected results. This gain came despite the earnings per share (EPS) miss from Circle Internet Group, Inc.
Meanwhile, U.S. Treasury bond yields dropped, while Japanese bond yields rose.
The U.S. Dollar (USD) remains broadly weak, allowing the EURUSD pair to stay near its two-week high, despite a cautious market mood ahead of key data releases: the Eurozone’s final Q2 Gross Domestic Product (GDP), the U.S. Producer Price Index (PPI) release, and the U.S. Initial Jobless Claims.
Adding support to the Euro, several European Central Bank (ECB) officials have recently pushed back against calls for rate cuts—contrasting with the dovish tone from Federal Reserve (Fed) officials and U.S. policymakers. This divergence, combined with optimism over progress in Russia-Ukraine peace talks, is helping lift the EURUSD even in the absence of strong domestic Eurozone data.
Should the scheduled U.S. data surprises or other factors align, it could trigger a “turnaround Thursday”—potentially supporting a rebound in the U.S. Dollar and weighing on the EURUSD.
GBPUSD rose to its highest level since July 10, though it lacks strong upward momentum and trades sideways at press time. The pair is supported by a weaker U.S. Dollar (USD), despite downbeat UK housing data being largely ignored by the market.
According to the UK’s Royal Institution of Chartered Surveyors (RICS), UK house prices have dropped to a 13-month low, driven by concerns over potential tax changes and interest rate uncertainty. Meanwhile, a mix of UK monthly data and quarterly Gross Domestic Product (GDP) results offered limited but enough support to keep GBPUSD buyers active ahead of the key U.S. Producer Price Index (PPI) release.
Elsewhere, the USDJPY pair posted its biggest daily decline in two weeks, falling to a three-week low after U.S. Treasury Secretary Scott Bessent advocated for a Bank of Japan (BoJ) rate hike—an unusual move that strengthened the Japanese Yen (JPY).
Adding further support to the Yen, a Reuters survey showed rising optimism among Japanese firms following the revised U.S.-Japan trade deal. Additionally, the dovish stance of the Federal Reserve (Fed) continues to weigh on USDJPY, ahead of both the U.S. PPI and Japan’s Q2 GDP, due Friday.
AUDUSD climbed to a two-week high, supported by a strong Australia employment report, especially in full-time jobs, and the previous day’s positive wage growth figures. These developments boosted expectations that the Reserve Bank of Australia (RBA) will pause further interest rate cuts. The move also aligns with the broader dovish bias from the U.S. Federal Reserve (Fed). However, gains slightly eased ahead of the key U.S. Producer Price Index (PPI) release.
Meanwhile, the NZDUSD pair snapped its two-day winning streak, posting mild losses. On the same line, the USDCAD also recorded its first daily gain in three sessions, helped by softer crude oil prices—Canada’s major export—and hawkish Bank of Canada (BoC) meeting minutes, which signaled a possible pause in further rate cuts.
Gold struggles to extend its two-day winning streak but resists further losses as a weaker U.S. Dollar (USD) and rising uncertainty drive investors toward traditional safe havens. Ongoing concerns around the Federal Reserve (Fed), global trade tensions, and political instability continue to support gold prices.
Crude Oil trades at its lowest level in 10 weeks, recovering slightly after sharp losses. A surprise build in U.S. weekly crude inventories and demand concerns linked to U.S. tariffs weighed heavily on prices. Additionally, hopes for a Russia-Ukraine peace deal raise the potential for increased oil supply. Still, the Organization of the Petroleum Exporting Countries (OPEC) maintains confidence in its 2025 demand forecast, suggesting no immediate threat to global oil demand projections.
Cryptocurrencies remain strong as more technology institutions increase their crypto reserves in search of higher returns. Sentiment is also supported by former U.S. President Donald Trump’s pro-crypto stance. This optimism persists despite concerns over the GENIUS Act—legislation already signed by Trump—which critics warn could create a loophole draining $6.6 trillion from U.S. banks, though crypto traders have largely shrugged off this risk.
Looking ahead, key events to watch on Thursday include the Eurozone Q2 GDP revision, U.S. Producer Price Index (PPI) for July, and earnings reports from Alibaba. These data points could be pivotal in determining market direction. If any of these events produce surprises, it could trigger a correction in the U.S. Dollar, potentially leading to a downturn in EUR/USD—especially if the EU GDP falls short of expectations.
Meanwhile, Gold may face resistance in its upward move, with a potential pullback if broader market sentiment shifts or if the U.S. Dollar strengthens. On the other hand, cryptocurrencies and equities are likely to stay firm, supported by ongoing institutional interest and broader market optimism. However, crude oil is expected to struggle to rebound, given the pressure from weaker demand outlooks and concerns over global supply.
In conclusion, Thursday’s economic data and corporate earnings reports have the potential to significantly shift market sentiment. A surprise in the U.S. PPI or weaker-than-expected EU GDP could help the U.S. Dollar recover and dampen commodity prices like gold and oil. On the other hand, if the data aligns with current expectations, risk assets such as cryptocurrencies and stocks may continue to hold firm, while the oil market may face a prolonged period of consolidation. Traders will need to stay alert to these key catalysts for a possible market turnaround.
May the trading luck be with you!
