Markets opened slightly positive on Tuesday, supported by stronger-than-expected growth and activity data from China. Optimism also stemmed from hopes that U.S. President Trump's tariff threats are mainly a negotiating tactic, with expectations for lighter measures and a possible trade deal before the August 1 deadline.
Meanwhile, expectations for a Federal Reserve rate cut declined after hawkish remarks from Cleveland Fed President Beth Hammack and Fed Chair Jerome Powell. Powell emphasized the Fed’s commitment to transparency and cooperation with lawmakers while resisting pressure from Trump for rate cuts or resignation.
Tensions rose elsewhere as Trump reimposed a 17% anti-dumping duty on Mexican tomatoes. At the same time, the EU, Mexico, and Canada are rushing to complete trade deals to avoid heavy tariffs. The EU has already drafted retaliatory measures in case talks with Washington break down before August. Japan and the EU are also working to strengthen trade ties amid growing U.S. pressure.
Global sentiment was further challenged by Trump’s mixed NATO stance and efforts to push Russia toward a ceasefire deal while continuing military support to Ukraine. Moody’s also issued warnings for the US housing market, which added to the cautious tone.
On the corporate front, tech stocks gained after NVIDIA announced the resumption of chip exports to China, and Meta Planet revealed plans to invest hundreds of billions in AI infrastructure.
In economic data, China’s Q2 GDP and industrial production beat expectations, though retail sales and house prices declined. In the UK, BRC retail sales rose, but Barclays’ data showed softer consumer spending. Bank of England Governor Andrew Bailey told G20 leaders that ongoing uncertainty is weighing on growth, limiting GBP/USD gains despite a modest rebound.
European Central Bank officials also struck a cautious tone, increasing the likelihood of a discussion on downside risks in their next meeting. This added pressure on EUR/USD, despite the pair ending a four-day losing streak ahead of today’s U.S. inflation data and upcoming European reports.
In Japan, long-term bond yields climbed as USD/JPY approached the 150.00 level, triggering fears of government intervention. Expectations of a BoJ inflation forecast revision and U.S.-Japan trade tensions are also in focus.
AUDUSD and NZDUSD struggled to recover, despite better Australian consumer confidence. USDCAD stayed pressured after a rise in Canadian wholesale trade, though falling crude oil prices—due to demand concerns, weak geopolitics, and rising U.S. inventories—challenge the pair sellers.
Gold prices edged higher after breaking the $3,338 resistance, supported by investor anxiety. Cryptocurrencies paused after Monday’s sharp rally. Equities remained firm following Wall Street’s strong close, while bond yields stayed elevated. It should be noted that the US Dollar Index (DXY) pauses its three-day winning streak with mild losses by the press time.
EURUSD continues to face pressure, despite mild gains following a four-day losing streak. The recovery was partly supported by a pullback in the United States Dollar (USD) ahead of the United States Consumer Price Index (CPI) data. However, concerns over U.S. President Donald Trump’s 30% tariff threats, geopolitical tensions within the European Union (EU), and cautious remarks from European Central Bank (ECB) officials weigh on the major currency pair. Additionally, the EU’s draft plan for heavy retaliatory measures against the United States (U.S.)—if trade talks fail before the August 1 deadline—adds to the downside risks. Geopolitical tensions with Russia and within the EU further challenge Euro (EUR) buyers ahead of the EU and German ZEW Economic Sentiment data and EU Industrial Production.
GBPUSD snaps a three-day losing streak while bouncing from its lowest level since late June. The recovery is supported by strong Retail Sales data from the British Retail Consortium (BRC). However, it is tempered by slower consumer spending shown in a survey from Barclays and remarks from Bank of England (BoE) Governor Andrew Bailey. Bailey highlighted ongoing challenges to the United Kingdom (UK) economic growth, suggesting the Pound’s recovery is likely a consolidation driven by the USD’s retreat, rather than true strength.
USDJPY pulls back from a three-week high, ending a two-day uptrend. This move follows growing speculation about Japanese government intervention to defend the Yen (JPY) from breaking the critical 150.00 level. A rally in long-term Japanese Government Bonds (JGBs) added pressure, with 30-year JGB yields hitting record highs and 20-year bonds reaching their highest levels since 1999. Market sentiment remains mixed as Japan navigates trade tensions with the U.S. and uncertainty surrounding the Bank of Japan’s (BoJ) next policy move.
AUDUSD and NZDUSD paused their declines as the U.S. Dollar softened and China released mostly positive economic data. However, both commodity-linked currencies remain under pressure due to persistent global trade war fears and broader geopolitical tensions.
Australia’s Westpac-Melbourne Institute Consumer Sentiment Index rose by 0.6% month-on-month (m/m) in July to 93.1. In Canada, wholesale trade grew by 0.1% versus the expected -0.4%. Still, the USDCAD pair remains firm, supported by falling crude oil prices—Canada’s key export. Crude oil posted its largest daily slump in three weeks amid a technical breakdown, demand concerns driven by trade war risks, lack of fresh geopolitical tensions in the Middle East, and a surprise buildup in weekly U.S. inventories. Fading optimism over a U.S.-Canada trade deal also contributed to the weakness in the Canadian Dollar (CAD), helping to limit the downside in USDCAD despite its first daily loss in three sessions.
West Texas Intermediate (WTI) crude oil is attempting to recover after posting its biggest daily slump in three weeks. The decline was triggered by a technical breakdown, demand concerns, rising United States (U.S.) inventory levels, and a lack of supply-related headlines from the Middle East. Ahead of today's trading, oil prices are consolidating as traders assess the outlook.
Gold buyers also paused after pushing prices above the key $3,338 resistance, now turned support. This level includes the 21-day Simple Moving Average (SMA) and a descending trend line from the past month. The pause likely reflects market consolidation ahead of today’s U.S. inflation data and mixed economic figures from China.
Cryptocurrency bulls are also taking a breather. Bitcoin (BTCUSD) briefly hit a record high before trimming gains, while Ethereum (ETHUSD) pulled back from a multi-month peak. The retreat comes as investors reassess the drivers behind the recent surge, including optimism around the “Crypto Week,” strong institutional buying, and key technical breakouts.
Today’s economic calendar is packed, featuring key Eurozone and German IFO Business Climate surveys, European Union (EU) Industrial Production data, and inflation reports from the United States (U.S.) and Canada. Market participants will closely watch these releases.
Hopes for strong U.S. inflation data, especially the U.S. Consumer Price Index (CPI), could boost the U.S. Dollar (USD). If confirmed, a stronger USD would likely weigh on EUR/USD prices, even if EU data comes in stronger. Other major currencies may follow the USD’s lead, potentially facing further losses amid ongoing tariff rhetoric from U.S. President Donald Trump.
Meanwhile, the Japanese Yen (JPY), Swiss Franc (CHF), and Gold could remain relatively firm. Cryptocurrencies, on the other hand, may pull back some recent gains as investors react to the mixed market signals.
May the trading luck be with you!
