EURUSD defends post-US GDP recovery to pare weekly loss, US Core PCE Inflation eyed

Market sentiment remains cautiously optimistic as the recently mixed US data renewed dovish Fed expectations ahead of the US Core PCE Price Index, also known as the Fed’s favorite inflation gauge. Apart from that, the G20 statement suggests a “soft landing” in major economies and China’s readiness for more stimulus, which also challenges the previous risk aversion. However, Tech rout and downbeat yields test the optimists ahead of next week’s top-tier central bank meetings and the US jobs report, not to forget inflation data from Australia.

With this, the US Dollar Index (DXY) remains on the way to posting the weekly loss but fails to help the EURUSD, GBPUSD and Gold prices. That said, WTI Crude Oil also braces for the third consecutive weekly loss and the Antipodeans like AUDUSD, NZDUSD and USDCAD are also down on a weekly basis.

Alternatively, USDJPY and USDCHF justify the Yen (JPY) and the Swiss Franc’s (CHF) traditional haven status while also cheering the US Dollar’s weakness.

BTCUSD and ETHUSD recover from the weekly low but remain on the way to posting the first week-on-week loss in three amid fresh challenges to Donald Trump's Presidency due to Kamala Harris’s entry in the US Presidential race.

Following are the latest moves of the key assets:

• WTI Crude oil extends recovery from a six-week low to pare weekly loss near $78.50 by the press time.
• Gold bounces off a 5.5-month-old support line and the 50-SMA to consolidate the weekly loss near $2,370 as we write.
• The USD Index remains sidelined around 104.30 and fails to portray any major moves on the day, as well as on the week, at the latest.
• Wall Street closed mixed and so did the Asia-Pacific shares. However, equities in Britain and Europe print mild gains during the initial trading hour.
• BTCUSD and ETHUSD both print notable gains to pare weekly loss by rising to $67,100 and $3,270 at the latest.

US Dollar licks its wounds ahead of Fed inflation…

Even if the first readings of the US Q2 GDP came in strong and allowed the US Dollar to rebound from the weekly low, the details weren’t impressive and joined disappointing prints of the US Durable Goods Orders to challenge the Greenback’s recovery momentum. Also supporting the USD’s corrective bounce were upbeat clues from the Initial and Continuing Jobless Claims. Amid these plays, the US Dollar Index (DXY) closed on the positive side with mild gains but retreated early Friday amid the market’s cautious mood ahead of the US Core PCE Price Index for June, also known as the Federal Reserve’s (Fed) preferred inflation gauge.

While the US Dollar witnessed a corrective bounce, the EURUSD also recovered from a fortnight low and snapped a two-day losing streak, edging higher of late. In doing so, the Euro pair ignored softer prints of German IFO Sentiment Survey data for July.

GBPUSD stood on the other side and dropped the most in a week while falling to a two-week low as the UK’s CBI Trend Total Orders slumped in July. Also likely to have weighed on the Cable pair were comments from UK Finance Minister Rachel Reeves who cited the nation’s fiscal mess and promised to fix it.

Japan's Finance Ministry's Vice Finance Minister for International Affairs Masato Kanda spoke from the Group of 20 Nations (G20) Finance Ministers’ meeting in Brazil, saying, “G20 must be increasingly vigilant to excessive, speculative fx fluctuation.” Kanda’s statements preceded softer prints of Tokyo inflation for July and no change in the government’s economic assessment for July to allow the USDJPY bears take a breather. Also challenging the Yen pair sellers is the 200-EMA support at the 12-week low and mixed sentiment ahead of today’s US Core PCE Price Index for June.

On the other hand, Reuters came out with the news suggesting the US constructing infrastructure facilities in Northern Australia amid the Sino-American tensions. The same could propel the geopolitical woes and underpin the US Dollar’s haven demand. However, the fears surrounding China’s economic growth supersede that and weigh in the Antipodeans like the Dollars of Australia, New Zealand and Canada.

Even so, China’s intervention to defend the Yuan prices and upbeat prints of the ANZ – Roy Morgan Consumer Confidence for July allowed NZDUSD to stabilize at the lowest level in three months while challenging the six-day downtrend. On the same line, AUDUSD also licks its wounds at the 12-week low amid the market’s cautious optimism after the mixed US data. Furthermore, USDCAD retreats from the highest level since November 2023 as Crude Oil posts the biggest daily jump since July 01 while bouncing off a seven-week low.

A pullback in equities and hopes of experiencing a “soft landing” in major economies, as well as expectations of witnessing lower rates, allowed Crude Oil to recover from the multi-day low and mark the biggest daily jump since early July. Apart from that, China’s stimulus, geopolitical tensions, and hopes of more US energy demand in the summer also helped the black gold.

Gold price dropped to a 13-day low before bouncing off the 50-SMA as the US Dollar’s corrective bounce contrasted with a fall in the benchmark Treasury bond yields. With this, the bullion prices brace for the second consecutive weekly loss amid dwindling markets and mixed mood ahead of next week’s monetary policy meetings in the US, Japan and the UK. Furthermore, China’s economic woes and mixed bias about the gold demand from India, two of the world’s top customers, also challenge the precious metal prices of late.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

US Core PCE Price Index eyed ahead of FOMC…

Given the recently mixed inflation and growth numbers from the US, as well as a lack of clarity about the Fed’s rate cuts past September, today’s US Core PCE Price Index for June will be crucial to watch. That said, the headline figure is expected to ease to 2.5% YoY from 2.6% but could stay unchanged on MoM at 0.1%. Should the inflation pressure ease, which is more likely, the Fed might reassess its latest hawkish statements rejecting no more rate cuts than two in 2024. The same could weigh on the US Dollar Index (DXY) and allow the commodities to pare weekly losses. However, any positive surprises will pave the way for the hawkish FOMC appearance during the next week and can bolster the Greenback’s latest rebound.