The week winds down quietly with little movement, as a light economic calendar and lack of major news keep things subdued. Optimists remain hopeful, but challenges to US soft landing concerns and hints of a September rate cut by the Federal Reserve are limiting market activity ahead of next week’s US inflation data.
As a result, the US Dollar Index (DXY) remains on the way to posting a three-week downtrend despite recovering in the last three days. However, the same fails to direct EURUSD traders as the pair remains unchanged weekly without any key catalysts. Meanwhile, GBPUSD braces for a four-week losing streak but the USDJPY prepares for the first weekly gain in five on the Bank of Japan (BoJ) official’s doubts about further rate hikes.
AUDUSD, NZDUSD, and USDCAD benefit from upbeat commodity prices, backed by China’s efforts to defend the economic transition and upbeat inflation data. Further, Crude Oil eyes the first weekly gain in five while Gold remains pressured despite posting the biggest daily jump in three weeks the previous day.
Equities edge higher but the bond markets remain volatile as traders lack conviction about global growth.
Bitcoin (BTCUSD) marked the biggest daily jump since February 2022 on Thursday, paring the upside moves with mild losses afterward. On the same line, the Ethereum (ETHUSD) also jumped the most in 12 weeks ahead of Friday’s pullback. While looking at the key catalysts, headlines suggesting the White House’s attempt to convince crypto leaders that Kamala Haris has pro-crypto policies gained major attention.
Following are the latest moves of the key assets:
Thursday’s lower-than-expected US Initial Jobless Claims allowed the US Dollar Index (DXY) to print a three-day winning streak. However, comments from the Federal Reserve (Fed) officials backed the market’s September rate cut and challenged the Greenback buyers afterward. It’s worth noting that upbeat US employment clues and dovish Fed talks underpin the market’s positive sentiment even if geopolitical headlines from China, the US and the Middle East test the optimists.
Talking about the Fed commentary, Kansas City Federal Reserve Bank President Jeffrey Schmid stated, “If inflation data keeps coming in low, appropriate to lower rates.” Further, Federal Reserve Bank of Chicago President Austan Goolsbee said that they need to see more than payrolls and more than one month (to confirm further rate cuts). The policymaker also added, “We are getting back to more normal conditions in the US economy.” Further, Richmond Fed President Thomas Barkin tamed fears of softening the US labor market but failed to inspire much positivity.
Earlier in the day, China released headline inflation data for July. That said, the frontline Consumer Price Index (CPI) came in 0.5% YoY versus 0.3% expected and 0.2% prior whereas the Producer Price Index (PPI) also reprinted -0.8% figures on a yearly basis versus the market forecasts of -0.9%.
The inflation figures initially allowed AUDUSD and NZDUSD to refresh intraday high before the risk-negative news from China weighed on the Antipodeans and commodity prices.
Reuters came out with the news citing Chinese state media that said, “Trading accounts must not be borrowed.” Beijing’s move could be linked to an effort to tame the recent jump in the national bonds and defend the country’s struggling financial markets. Following the news, China’s bond prices dropped and yields recovered. However, the move failed to last long amid fears about the dragon nation’s economic transition.
Against this backdrop, the US Dollar’s gauge versus six major currencies retreat after a three-day winning streak while Gold price pares the biggest daily jump in three weeks. That said, Crude Oil rises for the third consecutive day and takes clues from the US Dollar’s pullback to weigh on the USDCAD prices ahead of Canada employment data. It should be observed that the equities regain upside momentum while bonds remain volatile.
It should be noted that the EURUSD lacks clear directions amid a light calendar and the European Central Bank (ECB) officials’ unsurprising comments suggesting dovish bias. Apart from that, an absence of major news/data from the bloc also limits the major currency pair’s latest moves. Even so, the Euro bulls appear to lack control and the bears are lurking behind the supports to retake control.
Meanwhile, GBPUSD bucked the trend and recovered from a five-week low the previous day, edging higher of late, amid the technical breakout and reassessment of the dovish concerns surrounding the Bank of England (BoE).
Today, after catching some hints on China’s inflation, the rest of Friday's economic schedule is pretty quiet. But Canada’s July job numbers could shake things up for USDCAD traders, especially with rising Crude Oil prices and a retreating US Dollar. Keep in mind that the Bank of Canada’s (BoC) dovish stance might make things tricky for Loonie sellers as we await next week’s US inflation report.
Overall, markets are likely to wind down this week, which could help riskier assets maintain their gains. Still, watch out—if negative news hits, the US Dollar might bounce back from its earlier losses.
May the trading luck be with you!
