Market sentiment remains slightly positive early Friday, supported by optimism surrounding the US trade negotiations with China and the European Union, as well as mixed comments from Federal Reserve officials ahead of the pre-Federal Open Market Committee (FOMC) blackout period, which begins Saturday. Additional support for the market’s mildly upbeat tone came from the progress in the US House of Representatives passing the key cryptocurrency bills, the absence of major geopolitical tensions, and President Donald Trump’s limited negative influence on markets. Gains in the equity markets, especially in technology shares, also contributed to the positive mood, despite strong United States economic data keeping the US Dollar on track for weekly gains.
United States Retail Sales, Jobless Claims, and the Philadelphia Federal Reserve Manufacturing Survey data challenged the previously dovish bias of the Federal Reserve, which had been driven by softer United States Producer Price Index figures. These upbeat data releases temporarily strengthened the USD, but the positive sentiment and Federal Reserve Governor Christopher Waller’s remarks supporting a potential interest rate cut in July moderated the dollar’s rally. Meanwhile, other Federal Reserve officials—Raphael Bostic, Mary Daly, and Adriana Kugler—highlighted broader economic uncertainty and defended the Federal Reserve’s data-dependent approach, rejecting the idea of aggressive rate cuts as suggested by Donald Trump.
In political developments, a U.S. judge ruled that Donald Trump’s dismissal of a Federal Trade Commission commissioner was illegal, casting doubt on his ability to remove Federal Reserve Chair Jerome Powell. At the same time, Powell has continued to fully cooperate with investigations led by the Office of the Inspector General, which began in 2017, as part of what he described as a political witch hunt.
On the international front, China’s Minister of Commerce expressed satisfaction with progress on the US-China trade deal and praised the strength of China’s economy, domestic retail demand, and readiness for further economic stimulus. The People’s Bank of China injected 1.3 trillion yuan into the economy this week, marking the largest weekly injection since January. However, tensions rose as China threatened to block the Panama Canal ports deal unless its state-owned company, Cosco, is given a stake in the $23 billion global port sale. The White House stated that the European Union remains eager to continue trade negotiations with the US, while US Trade Advisor Peter Navarro noted that several trade agreements have been reached, though many remain unilateral in nature.
Japan released its inflation data for June, with all readings staying above the Bank of Japan’s 3.0% target. Both headline and core Consumer Price Index matched expectations at 3.3% year-over-year, slightly easing from prior readings. However, the Core Core Consumer Price Index exceeded both the previous figure and market expectations, rising to 3.4%. Additionally, political uncertainty ahead of Japan’s upper house elections this weekend added to the Japanese Yen’s weakness, supporting a second consecutive weekly gain in the USDJPY pair.
Elsewhere, New Zealand’s credit card spending declined in June 2025, and Canada’s Minister of International Trade expressed urgency in seeking dialogue with China to resolve trade issues. In the cryptocurrency space, the US House of Representatives approved three major bills on Thursday, marking significant progress for the digital asset sector.
Amid these developments, the US Dollar Index (DXY) remains volatile but is still set to post its first weekly gain in three weeks. This strength in the dollar is weighing on gold prices, which are testing key support near $3,315 and are also set for their first weekly loss in three weeks. Among currency pairs, the EURUSD is on track for a second weekly loss, the GBPUSD for a third, the AUDUSD for a first loss in four weeks, and the NZDUSD for a second weekly loss. The USDCAD pair is aiming for a second weekly gain. Meanwhile, top-tier cryptocurrencies such as Bitcoin and Ethereum are attempting to extend their four-week uptrend, even as momentum appears to slow.
Despite the lack of negative headlines around the US–EU trade deal and a pause in US dollar strength, EURUSD remains on track for a second straight weekly loss. The pair stays under pressure due to a broadly stronger dollar, concerns over the EU’s economic outlook, and cautious comments from European Central Bank officials.
In the UK, mixed employment data and stronger inflation are balanced by optimism over a US–UK trade deal. However, this isn't enough to lift GBPUSD, which is heading for its third weekly decline amid growing worries about the UK’s fiscal health and ongoing political uncertainty. Caution ahead of upcoming US data, a meeting between the US and the UK officials on trade deal and Federal Reserve comments before the late-July FOMC meeting also weigh on the pair.
USDJPY continues to climb, even as Japan's inflation holds above the Bank of Japan’s 3.0% target. A softer Core Core CPI reading and uncertainty over the US–Japan trade deal limit support for the yen. Political concerns, including speculation that Japan’s ruling party may lose this weekend’s upper house election, are further boosting USDJPY, which is set for a second straight week of gains.
Supportive comments from China’s Commerce Ministry, a large liquidity injection by the People’s Bank of China, and signals of more stimulus challenge pressure on commodity-linked currencies. However, a stronger US dollar, dovish outlooks from the Reserve Bank of Australia and Reserve Bank of New Zealand, along with concerns over the US–Canada trade deal and weak Canadian data, continue to weigh on the Australian, New Zealand, and Canadian dollars.
Additionally, falling crude oil prices—Canada’s key export—add extra pressure on the Canadian dollar, pushing USDCAD toward a second weekly gain. As a result, AUDUSD is set for its first weekly loss in four weeks, while NZDUSD is heading for a second straight weekly decline.
Despite ongoing trade and political tensions and reports from the World Gold Council and China highlighting strong gold demand, the precious metal is set for its first weekly loss in three. The decline is mainly driven by a stronger US dollar and gold’s inability to hold above an upward-sloping support line from December 2024, now near $3,315.
Adding to the pressure are talks that Trump may not be able to control the Federal Reserve, and that the central bank could reconsider aggressive rate cuts in 2025 due to tariff-driven inflation and economic uncertainty.
Like gold, crude oil struggles to benefit from supply concerns in the Middle East and a surprise drop in US weekly inventories, as fears of weaker demand from Trump’s tariffs and a stronger US dollar weigh on prices. Energy markets also worry that OPEC+ supply cuts are proving ineffective, suggesting the cartel may need to take further action, which adds pressure on oil prices.
Meanwhile, Bitcoin (BTCUSD) and Ethereum (ETHUSD) are set for a fourth consecutive weekly gain, supported by US policymakers advancing key crypto bills in the House of Representatives. Technical breakouts and rising institutional interest further fuel the upside in both cryptocurrencies.
Looking ahead, the preliminary July data from the University of Michigan on Consumer Sentiment, Consumer Expectations, and Inflation Expectations will highlight the economic calendar, though the main market focus will remain on broader risk events. If the data shows stronger inflation and upbeat sentiment, the US dollar could end the week higher, which may push gold below the key $3,315 support and put pressure on major currencies, crude oil, and commodity-linked currencies like the Australian and New Zealand dollars. Cryptocurrencies, however, are likely to stay firm, supported by industry optimism and growing institutional interest.
That said, any unexpected moves from Trump—such as attempts to fire Powell, impose new tariffs, or escalate political tensions around Ukraine or the Middle East—could trigger a sharp market reaction. Such developments may weaken the dollar and allow gold to rebound.
May the trading luck be with you!
