Despite Trump’s “Big Beautiful Bill” passing the Senate and moving to the House, the US Dollar struggled to gain momentum after bouncing off its lowest level since February 2022. Deutsche Bank's analysis suggests a decline in demand for dollar-denominated assets from foreign investors. Fed Chair Powell’s “Wait and See” stance, along with hints of a possible rate cut in July, added to the Dollar’s woes. Meanwhile, positive US data, including better-than-expected ISM Manufacturing and JOLTS Job Openings, helped limit the Greenback’s decline, while US-Japan trade tensions and hopes for US trade deals with India, the EU, and Canada added to the mix.
On the global front, the US announced Israel’s readiness for a 60-day ceasefire with Iran, while the Pentagon paused some weapon shipments to Ukraine due to concerns over depleted US stockpiles. The US Dollar Index (DXY) bounced off a multi-month low but lacked strong upward momentum on its first positive day in 10 days.
In the UK, wage growth picked up, and June’s final manufacturing PMI confirmed initial readings. However, BoE Governor Bailey warned of signs of economic and employment weakness, which pressured GBPUSD near its highest point since late 2021. EURUSD retreated from a high not seen since September 2021, as ECB President Lagarde emphasized a data-dependent approach on future rate decisions.
In commodity currencies, AUDUSD fell due to weaker retail sales, signaling a possible RBA rate cut, while NZDUSD followed suit. USDCAD held steady amid Canada’s continued push to lift Trump-era tariffs as part of a deal with the US. The Loonie pair ignored oil’s recovery, which didn’t match a surprise build in inventories, according to the API’s weekly survey.
Gold remained strong after breaking the $3,320 resistance level, equities ticked up following a mixed Wall Street close, bond yields bounced back, and cryptocurrencies remained uncertain.
The US Dollar’s recent bounce, combined with cautious comments from ECB officials and no major updates on the US-EU trade deal, is weighing on EURUSD, which is holding near its highest level since late 2021. On Tuesday, ECB President Lagarde stressed a data-dependent approach and avoided giving clear guidance on further rate cuts. Despite this, expectations that the ECB may pause after 10 consecutive rate cuts, along with a generally weaker US Dollar, continue to support EURUSD buyers. However, PMIs from Germany, France, and the Eurozone showed readings below 50, while Eurozone inflation for June stayed at 2.0%, adding some caution.
Meanwhile, a rise in global bond yields, trade concerns between the US and Japan, and weak Japanese data are helping USDJPY recover from a one-month low, as markets question the Bank of Japan’s ability to raise rates further.
GBPUSD pauses its two-day rally near its highest level since October 2021, as UK wage growth data fails to boost sentiment. BoE Governor Andrew Bailey expressed concerns over growth and employment, dampening optimism. Additionally, uncertainty around the UK-US trade deal’s ability to boost the economy and political tensions in the UK are weighing on GBPUSD, especially with the US Dollar’s recent bounce.
The US Dollar's rebound, along with rising geopolitical tensions in the Middle East and Ukraine, and China’s struggles to revive its economy, put pressure on the Australian, New Zealand, and Canadian Dollars. AUDUSD faces extra headwinds from weaker Aussie Retail Sales and Building Permits, retreating from an eight-month high, while NZDUSD also pulls back from its highest level since October 2024. USDCAD weakened as Canada prepared to challenge US tariffs, ignoring a bounce in Crude Oil, Canada’s key export, and optimism surrounding the country’s political and monetary policies under Carney.
Crude Oil posted its biggest daily gain in over a week, despite a surprise build in API inventories, possibly gearing up for this week’s OPEC+ decision, where the cartel is expected to defend a supply increase. Meanwhile, Gold holds above the $3,320 resistance, now support, continuing its upward move, though it struggles to maintain a two-day winning streak at a one-week high amid mixed market conditions.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) end their two-day losing streak, driven by optimism around institutional demand, technical support, and the positive momentum following Trump’s spending and tax bill passing through the Senate.
Wednesday’s economic calendar highlights the US ADP Employment Change, Canada’s final June S&P Global Manufacturing PMI, and US Weekly Inventory data from the EIA. ECB’s Lagarde and central bankers from the UK and the US will also speak. However, all eyes will be on Trump’s bill passing through the House before July 4, and the ongoing US trade and political tensions. The risk sentiment is expected to stay uncertain, potentially boosting the US Dollar further if the ADP numbers meet optimistic forecasts. This could lead to a pullback in GBPUSD and weigh on EURUSD, while supporting USDJPY and USDCAD’s recent recoveries. Gold and Crude Oil may struggle for direction, while equities and cryptocurrencies could lose some of their recent gains. Nothing major is expected until Thursday, when the US employment report is released and Trump’s bill faces more hurdles before reaching his desk for signing.
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