President Trump’s new tariff hikes on Canada, Switzerland, and copper imports are taking center stage, overshadowing his push to reduce drug prices. He also agreed to a 90-day pause on tariffs for Mexico. However, U.S. officials are growing more skeptical about the U.S.-China trade deal, especially after Beijing halted approvals for U.S. investments.
In the latest U.S. data, the Core PCE Price Index came in stronger than expected, jobless claims eased, and the Q2 Employment Cost Index showed improvement. However, July layoffs rose, and the Atlanta Fed’s GDPNow model downgraded its Q3 GDP forecast to 2.3%, down from 2.9% in Q2.
Meanwhile, China’s Caixin Manufacturing PMI slipped into contraction, raising concerns over the second-largest economy. German inflation improved, but the Euro struggled as unemployment data disappointed. Japan also saw its Manufacturing PMI fall back into contraction, and the Finance Minister called for Yen market intervention, triggering a pullback in USDJPY.
In the Pacific, Australia’s Q2 PPI eased, and New Zealand’s building consent and consumer confidence both came in lower. Still, the USD’s pullback helped AUDUSD recover slightly, but NZDUSD hit an 11-week low.
The US Dollar Index (DXY) paused its six-day winning streak at a nine-week high, while gold bounced off a month-low. EURUSD is stuck, unable to gain momentum, while GBPUSD is on a seven-day losing streak, nearing its lowest level since May 13.
Crude oil stabilized after reversing from a five-week high, driven by supply concerns amid Trump’s tough stance on Russia, Iran, and North Korea, despite inventory builds and OPEC+ support for higher supply.
Cryptocurrencies remain under pressure despite the latest pause in the downside. That said, Bitcoin (BTC/USD) and Ethereum (ETH/USD) eased amid disappointment from the White House’s crypto report. The much-awaited crypto report failed to mention Bitcoin and Ethereum but singled out Ripple (XRP), Solana (SOL), and Cardano (ADA) as having strong reserve potential.
Talking about Wall Street, the U.S. stocks closed with modest losses, despite strong earnings from Apple and Amazon. The details suggest fears of rising costs and the companies' limited AI capabilities. Elsewhere, the U.S. Treasury bond yields edged higher while Japanese Government Bond (JGB) coupons drifted lower as traders sought safety amid trade and geopolitical risks.
Strong U.S. economic data, supporting the Federal Reserve's push for further rate cuts, combined with market jitters from Trump’s actions, are fueling the U.S. Dollar’s strength. This has set the US Dollar Index (DXY) on track for its biggest weekly gain since September 2022. Meanwhile, sluggish data from the Eurozone and frustration over the U.S. trade deal are weighing on EURUSD, pushing it to its lowest point in a month. However, EURUSD steadied late Thursday and is consolidating Friday, as traders await the U.S. jobs report and preliminary Eurozone inflation data for July.
GBPUSD dropped for the seventh day in a row, reaching its lowest level since May 13. The lack of progress in finalizing the UK-US trade deal, despite Britain securing a favorable 10% tariff rate from Trump, has left traders concerned that Trump may reconsider the deal and impose higher tariffs on major economies.
Meanwhile, USDJPY pulled back after a two-day rally, retreating from its highest level since March. This move follows Japan’s verbal intervention and a stagnant unemployment rate, even as Japan’s July Manufacturing PMI fell into contraction. Despite the pullback, the Yen’s traditional safe-haven status and market consolidation after heavy USD buying are supporting the Yen.
AUDUSD bounced off a five-week low, snapping a six-day losing streak, despite softer Q2 PPI and a dovish outlook for the Reserve Bank of Australia. The rebound seems to be fueled by signs of China's stimulus. In contrast, NZDUSD dropped for the seventh consecutive day, hitting its lowest point since May 16. This decline follows weaker New Zealand Building Consents and Consumer Confidence data, alongside fading optimism over the US-China trade deal and a cautious mood ahead of the August 1 U.S. tariff deadline, weighing on both Antipodean currencies.
Meanwhile, USDCAD pulled back from a 10-week high, ending its six-day rally as WTI crude, Canada's key export, consolidated daily losses while preparing for its first weekly gain in three. Trump's 35% tariffs on Canada come with a twist, as he’s open to negotiating with Canadian PM Mark Carney, and the tariffs exclude USMCA goods. However, concerns about reduced energy demand due to U.S. trade policies and political tensions, combined with a stronger U.S. Dollar, continue to challenge USDCAD bears.
Gold's recent bounce from a month-low is supported by market consolidation ahead of the U.S. employment report and Trump's tariff deadline, along with a boost from the World Gold Council's latest report. Despite a stronger U.S. Dollar and concerns over China, the WGC highlights growing demand for gold, even as institutional buying from China slows. Meanwhile, central banks are moving toward rate cuts, and equities are climbing, which could limit further declines in oil as investors seek higher returns elsewhere.
Fears surrounding Trump's politics could disrupt the energy supply flows and some of the OPEC countries’ non-compliance with the cartel’s output increase rules, supersede the OPEC+ supply increase plan, higher inventories, and fears of less oil demand from China due to the Trump tariffs. With this, the WTI crude oil braces for the first weekly gain in three weeks.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) remain under pressure, bracing for the weekly loss, and traders show disappointment from the White House’s “Crypto Policy Report”. Also challenging the riskier assets could be the latest technical patterns and month-end consolidation after a heavy jump in mid-July due to the “Crypto Week”. Even so, heavy institutional demand and Trump’s pledge to make the U.S. the world’s crypto capital seem to keep the BTC and ETH buyers hopeful.
Looking ahead, traders will focus on the EU's July inflation data, the U.S. employment report, and ISM Manufacturing PMI, all due Friday. While these data might not drive the US Dollar to new highs, the negative impact of U.S. tariffs, geopolitical tensions, and the Fed's hawkish stance could keep the USD strong, unless the U.S. jobs report disappoints (which is unlikely).
The US Dollar’s strength could keep Gold sellers active, while EURUSD, GBPUSD, and the Antipodeans may remain under pressure. USDJPY could extend its recent pullback due to Japan’s haven demand and intervention signals. Cryptocurrencies are unlikely to recover significantly, but major losses are also not expected. Equities might trim weekly gains after Apple and Amazon's results, while U.S. Treasury bond yields could rise, helping the USD stay firm.
May the trading luck be with you!
