Global markets are showing routine caution ahead of today's Federal Open Market Committee (FOMC) monetary policy announcements. Key events also include preliminary Q2 Gross Domestic Product (GDP) data from Germany, the European Union (EU), and the US, along with the US ADP Employment Change report. Additionally, the White House will release its ‘crypto report’ after a 180-day review, alongside a Bitcoin reserve plan. Top earnings from Meta, Microsoft, Apple, and Amazon will also be released and escalate anxiety among the trader fraternity.
There’s also concern that the US Federal Reserve (Fed) might announce a dovish pause, influenced by Fed Governor Waller's recent shift toward a rate cut, which some believe could be motivated by political ambitions to gain support from US President Donald Trump for the Fed Chair position after Jerome Powell’s term ends in 2026.
On a positive note, the International Monetary Fund (IMF) has revised global growth forecasts for 2025 and 2026 upwards, as well as improving GDP projections for the US, Europe, and China.
US-China trade talks concluded with the expected extension of the tariff pause, and details will be released today. US officials like Secretary of the Treasury Dr. Brian Bassent, U.S. Trade Representative Ambassador Greer, and Commerce Secretary Gina Raimondo praised the US’s strong position in negotiations. U.S. President Donald Trump also praised the deal-making but refrained from commenting on rate cuts or firing Powell.
Meanwhile, an earthquake in Russia and a tsunami in Hawaii added to global tensions. Trump called for a peace deal with Ukraine and warned that heavy tariffs would be imposed on countries still buying Russian oil.
US economic data showed stronger consumer confidence, a reduced Goods Trade Balance deficit, and an easing in Job Openings (JOLTS). The Atlanta Fed’s GDPNow and Advanced Wholesale Inventories reports were also upbeat. In addition, the US Treasury Department conducted a successful auction of seven-year bonds, boosting demand and lowering bond yields, which helped the US Dollar remain strong.
China's Finance Minister Lan Fo’an announced plans for increased fiscal support to strengthen domestic consumption amid economic challenges, including trade-related headwinds. In Europe, German Economic Minister Robert Habeck expressed disappointment with the EU-US trade deal, while the EU’s one-year inflation expectations eased. ECB member Gabriel Makhlouf stated that the central bank is now in a "wait and see" phase regarding its easing cycle.
In the UK, June mortgage approvals rose to 64.17K, exceeding expectations. Australia’s Consumer Price Index (CPI) grew at its slowest rate in over four years, with Core CPI at a three-year low, increasing the likelihood of a Reserve Bank of Australia (RBA) rate cut in August. New Zealand showed strong business confidence but weaker business activity in its ANZ Business Survey.
Notably, Chinese investors have shifted funds from Gold ETFs to equities, while the US saw a surprise build in weekly oil inventories according to the API, compared to an expected drawdown.
As a result, the US Dollar Index (DXY) rose for four consecutive days, reaching a monthly high before retreating early on Wednesday. The dollar's pullback allowed Gold and cryptocurrencies to recover some losses, and major currencies halted their steep declines from the previous week. The AUDUSD struggled with weak inflation data, while the NZDUSD showed modest strength. The USDCAD retreated from a five-week high, with oil prices volatile after their recent surge. Equities saw slight declines ahead of major earnings releases, and bond yields remained pressured, reflecting cautious market sentiment.
With the pre-Fed pause in play, EURUSD rebounds from a five-week low, breaking a four-day losing streak, though upside momentum remains uncertain. The Euro is pressured by EU-US trade deal backlash, weak EU data, dovish ECB comments, and rising geopolitical risks. However, a stronger-than-expected German/EU Q2 GDP and EU Consumer Confidence could spark a recovery, especially if US data softens—though this is less likely. A dovish Fed could give the US Dollar bulls a break, which might help EURUSD maintain its rebound despite limited positives from the Eurozone.
Even with limited updates on the UK-US trade deal and recently mixed UK data, the GBPUSD managed to rebound from a 10-week low, pausing its four-day losing streak, mainly due to the US Dollar’s retreat. Also helping the British Pound (GBP) could be the hopes of witnessing no major rate cuts from the Bank of England (BoE) amid inflation pressure due to the trade jitters, as conveyed by the BoE officials in their latest public appearances.
Elsewhere, USDJPY remains pressured after reversing from a two-week high the previous day. That said, the US-Japan trade deal also gains a mixed response at home, and data from Japan isn’t too positive, but the odds of the Bank of Japan’s (BoJ) rate hike in 2025 increased slightly lately, allowing the Yen pair to better cheer the USD’s pullback. Also weighing on the USDJPY could be the Yen’s traditional haven status.
AUDUSD posts its first daily gain in five days, though upside momentum remains weak as Australia's inflation data points to a likely rate cut from the Reserve Bank of Australia (RBA). Meanwhile, NZDUSD shows a mild recovery after four days of losses, supported by mixed results from New Zealand's ANZ Business Survey, though buyers remain cautious.
USDCAD pulls back from a five-week high ahead of Canada’s inflation data and key US economic events. The retreat comes as the US Dollar weakens, while China's plans for more stimulus and stronger Crude Oil prices help slow USDCAD’s advance. Additionally, fears of a US-Canada trade conflict weigh on the Canadian Dollar, limiting its strength against the US Dollar.
Gold prices remain steady around $3,325 after bouncing from a three-week low. The lack of a strong reaction to the US Dollar’s pullback could be linked to Chinese investors pulling significant funds from Gold ETFs in July to invest in equities. Additionally, concerns over a potential technical breakdown are weighing on XAUUSD buyers.
Meanwhile, Crude Oil surged the most in 10 weeks, despite a surprise build in weekly inventories, according to the API’s industry survey. The jump follows Trump’s warning of heavy tariffs on countries buying Russian oil if Moscow doesn’t reach a peace deal with Ukraine in 10 days. Oil also ignored the OPEC+ announcement to maintain its production increase plan.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) are licking their wounds after a mostly downbeat performance this week. The cryptocurrencies are reflecting the strength of the US Dollar and also showing a cautious sentiment ahead of today’s White House "Crypto Report" and "Bitcoin Reserve" plans. It’s worth noting that the US Securities and Exchange Commission (SEC) has allowed authorized participants to exchange Exchange-Traded Product (ETP) shares directly for the underlying crypto assets—rather than settling in cash—streamlining the creation and redemption process. However, this news has failed to spark a major positive reaction from crypto buyers, as the overall mood remains cautious.
Looking ahead, traders will closely monitor the first Q2 GDP readings from Germany, the EU, and the US, along with the US ADP Employment Change and Canadian inflation data, ahead of the crucial Federal Open Market Committee (FOMC) announcement. The White House’s “Crypto Report” release and Q2 earnings from major companies like Amazon, Meta, Apple, and Microsoft will also be key events.
While the GDP figures could show positive results due to pre-tariff frontloading, they may prepare currencies for potential reactions to the Fed’s actions. The US Dollar is less likely to rise further, as the Federal Reserve is expected to keep rates unchanged, with some policymakers, like Waller, already signaling a potential rate cut. If the FOMC statement is too dovish, the US Dollar may face additional selling pressure, allowing major currencies, Gold, and cryptocurrencies to recover.
Equities are likely to remain firm, potentially reaching new highs if top-tier companies meet or exceed forecasts and the Fed matches dovish halt forecasts.
Overall, with a packed day of key events, it’s set to be a BIG and volatile day, so traders should approach with caution.
May the trading luck be with you!
