Market sentiment remains mostly downbeat but failed to inspire the US Dollar and Gold buyers, especially due to growth fears about China and the US, as well as doubts about the Federal Reserve’s (Fed) further rate cuts. Apart from that, mixed prints of the latest PMIs for July from the top-tier economies and cautious mood ahead of the US Q2 GDP and Fed’s preferred inflation gauge, namely the US Core PCE Price Index for June, also challenge the risk appetite.
With this, the US Dollar Index (DXY) extends the previous day’s retreat from a two-week high while the Gold Price declines to the lowest level in a fortnight.
Even so, EURUSD and GBPUSD lack recovery momentum due to mostly subdued data at home. However, the USDJPY and USDCHF cheer the haven status of the JPY and CHF while posting notable losses.
AUDUSD, NZDUSD, and USDCAD portray the market’s pessimism about Antipodeans, especially amid China's woes and dovish concerns for the respective central bank. China's woes could also be cited as the key catalyst for the Crude Oil’s weakness despite higher-than-expected inventory draw and geopolitical fears.
BTCUSD and ETHUSD both pare previous gains amid fresh challenges for Donald Trump’s US President status as the present President Joe Biden finally promoted Kamala Harris to run for the elections in November. Until now, Trump was leading the race and has favored better policies for cryptocurrencies.
Following are the latest moves of the key assets:
Jittery markets fail to underpin US Dollar strength…
The US Dollar Index (DXY) failed to cheer the risk-off mood the previous day and stayed pressured of late as the latest US PMIs for July back concerns about the US economic soft landing and challenge the Federal Reserve’s (Fed) hawkish bias.
Despite the US Dollar’s weakness, the EURUSD remains depressed amid downbeat prints of the Eurozone PMIs and fresh chatters about the European Central Bank’s (ECB) rate cuts. On the other hand, the GBPUSD closed mixed as unimpressive UK PMIs failed to cloud the economic fears about Britain.
USDJPY drops to the lowest level in three months, down for the fourth consecutive day, as market players prepare for the Bank of Japan’s (BoJ) much-debated rate hike in July. It’s worth noting that a slump in the US short-term Treasury bond yields and the US Dollar’s latest weakness also favored the Yen pair sellers. It should be observed that the Japanese Yen’s (JPY) traditional haven status adds strength to the bearish bias about the pair, especially when the markets are jittery due to geopolitical woes and China's growth fears. As a result, the Yen pair ignores the mixed Japan PMI data for July to refresh the multi-week low.
Earlier in the day, Japan's Finance Ministry's Vice Finance Minister for International Affairs Masato Kanda said that the G20 Finance Ministers discussed China’s excessive capacity, which fueled the trade war fears.
This is not only from Japan but also from US presidential election candidate Donald Trump’s readiness to levy 60% tariffs on Chinese products, which flags trade war fears and weighs on sentiment. Furthermore, concerns about China’s slowing economy and repeated failures to renew investor confidence despite announcing multiple rate cuts also underpin the risk-off mood and allow haven assets to edge higher. Reuters came out with the news citing liquidity crunch in China to challenge the risk appetite and drown Antipodeans like the Dollars of Australia, New Zealand and Canada.
Elsewhere, former New York Fed President William Dudley flagged fears about the US economic growth. The same joined the downbeat US PMIs and the housing data to recall the US Dollar sellers even if the US 10-year and 30-year Treasury bond yields remained firmer. With this, the US Dollar Index (DXY) reversed from a fortnight’s high, down for the second consecutive day by the press time.
In addition to the aforementioned catalysts, unimpressive earnings from the US technology giants pushed S&P and Nasdaq toward reporting the worst trading day since late 2022, as well as kept the Dow Jones on the back foot.
It should be noted that the risk aversion helped JPY and CHF but failed to inspire the Gold buyers amid China's woes. With this, the Gold price drops to the lowest level in two weeks. In doing so, the XAUUSD sellers approach a 5.5-month-old rising support line. That said, AUDUSD and NZDUSD also hold lower grounds as China jitters join fears of a corrective bounce and more rate cuts from the Reserve Banks of Australia and New Zealand.
On the same line, the Bank of Canada (BoC) matched market forecasts while announcing a second consecutive rate cut of 0.25%. It should be noted that the fresh changes to the BoC statement and a speech from BoC Governor Tiff Mackelm kept the policy doves hopeful and fueled the USDCAD to a 14-week high.
Apart from the second consecutive rate cut, worsening wildfire conditions in Canada’s Alberta province also weigh on the Canadian Dollar (CAD). Furthermore, downbeat prints of Canada’s housing data and crude oil’s failure to defend the previous day’s corrective bounce also propelled the USDCAD prices despite the softer US Dollar.
Crude Oil reverses the previous day’s corrective bounce off a six-week low while ignoring higher-than-forecast inventory draw in the weekly US stockpile data. The black gold’s weakness could be linked to fears suggesting slower energy demand from China and the US, as well as higher supplies from the major Oil producers.
A Slew of US data, ECB’s Lagarde in the spotlight…
Having witnessed notable volatility, the momentum traders are likely to experience another day full of moves on Thursday as multiple top-tier US data decorate the economic calendar. Apart from that, a speech from ECB President Christine Lagarde and German IFO sentiment data for July will also entertain the market players.
Among the scheduled catalysts, the first readings of the US second quarter (Q2) Gross Domestic Product (GDP) and weekly Jobless Claims will gain major attention amid chatters about the US economic soundness. Also important to watch will be the US Durable Goods Orders for June. Should the reported data manage to defend the “soft landing” concerns, the US Dollar may consolidate recent losses ahead of Friday’s key US Core PCE Price Index. It’s worth noting that next week’s FOMC highlights the US growth and inflation clues after the policymakers failed to impress hawks in their attempts and weighed on the US Dollar.
Elsewhere, ECB’s Lagarde and German IFO data may not be able to defend the EURUSD bulls even if the US Dollar remains pressured, as most of the bloc’s policymakers have favored rate cuts and the political woes are present in the old continent.
