On Wednesday, softer US inflation and light news flow led to a slight optimism in the markets, putting pressure on the US Dollar. This optimism continues into early Thursday as traders wait for US Retail Sales, Industrial Production, Jobless Claims, and other economic data. However, mixed statistics from China test the Greenback sellers during the Asia-Pacific trading session.
The US Dollar Index (DXY) is on track for a four-week decline despite upcoming consumer data. US Treasury bond yields have reversed their recent increase, which keeps the dollar under pressure, benefiting equities and gold prices.
The EURUSD is gaining, set for its biggest weekly increase since early July, while GBPUSD has ended a four-week decline despite mixed UK data. USDJPY and USDCHF are mostly steady but maintain last week's gains.
AUDUSD is holding onto weekly gains even after pulling back from a three-week high. Similarly, NZDUSD is on track for a three-week rise, despite a significant daily drop following the Reserve Bank of New Zealand’s (RBNZ) unexpected rate cut.
USDCAD is hovering around a monthly low and may see a second consecutive weekly loss, even as Crude Oil prices fall for the third straight day.
Gold prices have recovered from last week’s losses, showing their first daily gain in three days due to the weaker US Dollar and increased demand for safe-haven assets amidst mixed market sentiment.
Despite the weaker US Dollar, BTCUSD and ETHUSD have faced intraday losses. Ethereum data shows a negative trend, while Bitcoin is under pressure from a $591 million Silk Road BTC transfer by the US government. Increased activity in dormant Bitcoin wallets is also contributing to the downward pressure on BTCUSD.
Following are the latest moves of the key assets:
The US Consumer Price Index (CPI) came in slightly below expectations, boosting hopes for a US Federal Reserve rate cut in September. This dovish sentiment, combined with a lack of risk-negative news, led to a weaker US Dollar. The USD remains under pressure due to both the CPI data and ongoing speculation about Fed rate cuts.
As the US Dollar weakened, the EURUSD pair rose to its highest level in 2024, despite disappointing Eurozone Industrial Production data. Eurozone GDP and Employment Change for Q2 matched forecasts, with no major surprises.
In contrast, GBPUSD struggled to benefit from the weaker USD due to weak UK inflation data. However, positive industrial and manufacturing production data on Thursday helped GBPUSD head towards its first weekly gain in five weeks.
USDJPY has held onto its recovery from a seven-month low, supported by concerns about potential market intervention by Japan and speculation that the Bank of Japan might not raise rates further. USDCHF also shows slight gains due to improved market sentiment.
AUDUSD and NZDUSD are set for weekly gains thanks to a softer US Dollar, positive data from China, and a favorable risk environment. The Australian dollar has risen more than the New Zealand dollar, partly due to a strong employment report from Australia.
USDCAD, meanwhile, is heading for a second consecutive weekly loss, even as crude oil prices have fallen for three days straight. This drop in oil prices may be linked to an increase in US crude oil stockpiles and a lack of major news affecting Middle East oil supplies.
Gold prices have regained strength after falling last week, driven by market uncertainty, a weaker US Dollar, and lower US Treasury bond yields.
Looking ahead, the cautious optimism in the markets could put further pressure on the US Dollar, but upcoming US data may challenge this trend. Key data to watch includes July’s Retail Sales, Industrial Production, and weekly jobless claims. Additionally, the manufacturing surveys from the Federal Reserve Banks of New York and Philadelphia will be important.
Despite recent weaker US inflation data and Fed signals suggesting a rate cut in September, sellers of the US Dollar are likely to stay in control. Their attention will shift to potential rate cuts for 2024. If these cuts are confirmed, it could weaken the US Dollar further and boost the prices of Gold, EURUSD, and other currencies from Australia and New Zealand.
May the trading luck be with you!
