Wednesday lived up to its importance by triggering high volatility across global markets, offering key signals from long-awaited economic data, central bank updates, and developments in trade and cryptocurrency regulation. By the end of the day, the US Dollar (USD) emerged as the clear winner, equities declined, short-term United States Treasury bond yields surged, and risk assets such as Gold and cryptocurrencies weakened.
The day began with second-quarter Gross Domestic Product (GDP) reports from Germany, the European Union (EU), and the United States (US). Germany and the EU delivered mixed results, while the US economy outperformed with a 3.0% quarter-over-quarter growth, beating expectations. Supporting this positive trend, the US ADP Employment Change showed a strong increase of 104,000 jobs in July, exceeding both previous figures and market forecasts. This raised expectations for Friday’s key labor market report, including the headline Nonfarm Payrolls (NFP) figures.
The United States Federal Reserve (Fed) met expectations by keeping the benchmark interest rate unchanged, although two policymakers issued rare dissents—possibly to align with President Donald Trump’s repeated calls for rate cuts. Nonetheless, Federal Reserve Chair Jerome Powell remained optimistic about US economic growth, employment, and inflation, reinforcing his “wait and see” policy stance and resisting political pressure for immediate easing.
In terms of trade policy, President Trump announced new agreements with South Korea and India, involving 15% and 25% tariffs, respectively. He criticized India’s growing trade with Russia amid global efforts to isolate Moscow over its ongoing actions in Ukraine. Additionally, United States Commerce Secretary Howard Lutnick confirmed new trade deals with Cambodia and Thailand, signaling further strategic trade shifts.
From Asia, Japan posted better-than-expected Industrial Production and Retail Sales data. Australia also saw improvements in Retail Sales and Building Permits, although Private Sector Credit slowed. Disappointing Import and Export Price Index figures added to the pressure, while cautious remarks from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser reinforced dovish market sentiment, capping early gains in the Australian Dollar (AUD) despite some weakness in the US Dollar on Thursday.
China's official Purchasing Managers’ Index (PMI) data for July reflected persistent weakness. The Manufacturing PMI remained in contraction for the fourth consecutive month, while the Non-Manufacturing PMI fell to its lowest level since November 2024, indicating a slower recovery in services and overall economic momentum.
The Bank of Canada (BoC) and Bank of Japan (BoJ) both kept their monetary policies unchanged. The BoC cited ongoing economic uncertainty, while the BoJ raised its inflation forecast, suggesting potential interest rate hikes in late 2025 or early 2026. As a result, the Canadian Dollar (CAD) dropped despite strong crude oil prices, whereas the Japanese Yen (JPY) regained ground after a four-day losing streak, benefiting from the BoJ’s slightly hawkish tone and overall market caution.
In the energy sector, official US weekly crude oil inventory data confirmed a surprise increase, aligning with earlier private surveys. Despite the build, West Texas Intermediate (WTI) Crude Oil hit a fresh five-week high before retreating slightly.
On the corporate front, Meta and Microsoft posted strong second-quarter earnings, beating both revenue and profit estimates. Their results boosted optimism among technology investors ahead of upcoming earnings reports from Apple and Amazon.
The Euro (EUR) remained under pressure due to a combination of weak European Union data, lingering concerns over EU-United States trade tensions, and geopolitical risks linked to the Russia-Ukraine conflict. Meanwhile, the British Pound (GBP) declined further against the US Dollar, weighed down by lackluster UK-US trade negotiations and broader market strength in the USD. The New Zealand Dollar (NZD) managed to break a five-day losing streak by bouncing from a five-week low, while Gold dropped to a one-month low before staging a minor recovery.
In the cryptocurrency space, the White House released its long-anticipated “Crypto Policy Report,” urging the United States Congress to strengthen digital asset legislation and calling on regulators to introduce specific exemptions to support innovation. This move aimed to reinforce Donald Trump’s “pro-crypto” image. However, the report lacked direct references to Bitcoin or digital asset reserves, offering limited comfort to major cryptocurrencies. Despite some relief from a weaker US Dollar, both Bitcoin (BTCUSD) and Ethereum (ETHUSD) remained under pressure.
EURUSD rebounded from a seven-week low early Thursday as the US Dollar pulled back, which also helped GBPUSD recover from its lowest level since mid-May. However, earlier strength in the US Dollar, along with trade and political tensions in Europe and the UK, had dragged both EURUSD and GBPUSD to multi-day lows. As a result, both currency pairs are on track to record their first monthly loss in six months.
USDJPY surged to its highest level since early April, driven by a broadly stronger US Dollar, uncertainty over the US-Japan trade deal, and expectations that the Bank of Japan (BoJ) would hold rates steady through 2025. However, the BoJ struck a hawkish tone on Thursday by raising its inflation forecasts and signaling readiness to hike rates if inflation, growth, and employment data support it—potentially as early as late 2025. This shift pulled USDJPY down from its multi-day high, marking its biggest daily loss in over a week.
The Australian, New Zealand, and Canadian Dollars posted modest gains against the US Dollar early Thursday, though all remain on track for weekly and monthly losses. Strong Retail Sales and Building Permits data helped AUDUSD snap a five-day losing streak, but recovery was limited by dovish comments from Reserve Bank of Australia (RBA) Deputy Governor and weak Chinese PMI data. Similarly, NZDUSD recorded its first daily gain in six sessions but showed limited upward momentum. Meanwhile, USDCAD pulled back from a nine-week high, ending a five-day uptrend, as the Bank of Canada’s dovish pause and uncertainty around the US-Canada trade deal weighed on the pair, despite support from stronger crude oil prices.
Gold trades near a five-week low, attempting a mild recovery after posting its biggest daily loss since late June. The rebound is supported by a pause in the US Dollar’s rally and renewed safe-haven demand. However, pressure remains from the Federal Reserve’s hawkish stance, overall USD strength, and negative news from China. On Wednesday, China reported record outflows from its gold Exchange-Traded Funds (ETFs) as investors shifted to equities. On Thursday, reports revealed a government crackdown on gold purchases to combat money laundering, indirectly affecting demand from one of the world’s largest gold buyers.
Meanwhile, Crude Oil prices stayed firm despite a surprise rise in US weekly inventories, supported by supply concerns. These fears were fueled by former President Donald Trump’s push for a Russia-Ukraine peace deal, giving Moscow a 10-day deadline and threatening high tariffs on major buyers if no deal is reached—similar to the trade move against India on Wednesday. Ongoing tensions in the Middle East also added to supply worries, although an increase in output from the Organization of the Petroleum Exporting Countries and allies (OPEC+) capped further price gains.
Bitcoin (BTCUSD) paused its three-day losing streak but lacked strong upward momentum, while Ethereum (ETHUSD) held onto its previous day’s recovery only modestly. Broad US Dollar strength and typical month-end market consolidation pressured both cryptocurrencies. Sentiment was further dampened by the White House’s Crypto Policy Report, which, despite urging regulators and Congress to support more crypto-friendly legislation, failed to mention Bitcoin reserves—disappointing investors and limiting crypto market optimism. It’s worth noting that the report’s concentration on altcoins seemed to have favored slightly upbeat sentiment early Thursday.
While Wednesday's market shake-up was driven by strong U.S. GDP data, the Federal Open Market Committee (FOMC) decision, and the White House Crypto Policy Report, clarity remains elusive for traders. Attention now shifts to Thursday's key releases—the U.S. Jobless Claims and the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge. Also in focus are second-quarter earnings from Apple and Amazon, and how markets digest recent Fed signals and trade/political developments. Global efforts to finalize trade deals with the U.S. ahead of the August 1 tariff deadline may also stir market sentiment.
In this context, upcoming U.S. data could trigger a temporary pause in U.S. Dollar strength, giving room for Gold, the Japanese Yen, and other major assets to recover. Cryptocurrencies, however, may remain under pressure unless the White House policy report is clarified or amended. Meanwhile, equities and bond yields could continue to edge higher, supported by optimism around tech earnings and ongoing global uncertainty.
May the trading luck be with you!
