The risk appetite stays slightly positive as more signs suggest the US Federal Reserve might cut rates in September. Optimism is boosted by potential stimulus from China and a delayed Iranian response to Israel, which also weighs on the US Dollar. However, uncertainty ahead of the Fed’s latest meeting minutes is holding back market momentum.
The US Dollar Index (DXY), tracking the dollar against six major currencies, hit a yearly low over the past three days but is recovering slightly.
The Euro (EURUSD) hit a yearly high, benefiting from unchanged inflation data in the Eurozone and Germany.
The British Pound (GBPUSD) rose to its highest level since July 2023, breaking through a 10.5-month resistance trend despite mixed signals about the UK economy and the Bank of England’s next moves.
The Japanese Yen (USDJPY) dropped to a two-week low due to softer yields and concerns about potential rate hikes from the Bank of Japan.
The Australian Dollar (AUDUSD) reached a five-week high, rising for the fifth day in a row, while the New Zealand Dollar (NZDUSD) struggled to hold gains despite a two-month high and weak NZ data.
The Canadian Dollar (USDCAD) fell for the fourth consecutive day, approaching a previous monthly low amid weak inflation data and lower oil prices.
Crude Oil is under pressure, hitting a four-day losing streak due to concerns about energy demand and an unexpected increase in oil inventories.
Gold reached an all-time high of $2,531 but has since pulled back slightly. It’s now picking up again as investors seek safe havens amid market uncertainty.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) ended Tuesday with slight losses, struggling with market fears about potential regulatory challenges if Democrats win the US elections. Despite this, strong on-chain data, transfer volumes, and institutional interest are keeping buyers hopeful, leading to modest gains early Wednesday.
Following are the latest moves of the key assets:
Recent US employment data indicates easing job conditions, which could prompt the Federal Reserve to cut interest rates starting in September. The New York Fed’s quarterly survey revealed the highest number of job seekers since 2014, while the Philly Fed non-manufacturing employment index hit its lowest point since the pandemic.
Fed officials, including Governor Michelle Bowman, have suggested that if inflation trends toward target levels, it would be appropriate to gradually lower rates to avoid being too restrictive. This dovish outlook has weakened the US Dollar.
Additionally, positive news from China and the Middle East has put further pressure on the Greenback. China is considering a plan to fund local governments to purchase unsold homes, and Iran has stated that its retaliation against Israel will take time. However, there are concerns about the impact of European tariffs on China’s electric vehicle industry.
As a result, the US Dollar Index (DXY) has fallen, while Wall Street benchmarks and Treasury bond yields have also edged lower.
With this, the EURUSD cheered no change in its inflation clues from Germany and the Eurozone, as well as ignored concerns about the European Central Bank’s (ECB) rate cuts, to refresh the yearly high.
On the other hand, GBPUSD buyers are turning increasingly optimistic and fuelled prices to the highest level since July 2023 amid hopes of witnessing a smoother economic transition due to the new government. However, chatters about the BoE’s rate cuts and strong technical resistance around 1.3050-55 challenge bulls.
Apart from the US Dollar’s weakness, growing concerns about the BoJ’s another rate hike also allowed USDJPY sellers to keep the reins. That said, as per the latest Reuters poll, 57% of economists see the BOJ raising rates again by year-end. On the same line, Bloomberg came out with the news suggesting a potential candidate for Japan’s Prime Minister supports the BOJ continuing to hike rates.
AUDUSD benefits from the upbeat sentiment, China stimulus news and softer US Dollar but NZDUSD retreats from a multi-day top on downbeat NZ Credit Card Spending for July. Elsewhere, USDCAD ignored 40-month low inflation data at home and weaker Crude Oil prices as traders reassess clues to back the Bank of Canada’s (BoC) further rate cuts after the recent one.
Crude Oil dropped to the lowest level in a fortnight during a three-day losing streak, depressed by the press time, as the American Petroleum Industry (API) reported a surprise increase in the weekly oil inventories versus the expected draw. Also weighing on the energy prices could be the growing fears of energy demand and an absence of headlines challenging the supplies.
Gold buyers keep the reins around the record high despite lacking upside momentum lately as the market’s uncertainty joins the softer US dollar to drive traders toward traditional risk safety.
Traders are eagerly awaiting the Fed's latest monetary policy meeting minutes, which could confirm a rate cut in September and put additional pressure on the US Dollar.
If the minutes come across as hawkish and support a rebound for the US Dollar, the upside will likely depend on Fed Chair Powell’s speech at the Jackson Hole Symposium and preliminary August PMI readings from major economies.
Additionally, the revised July Nonfarm Payrolls (NFP), due to be released in the North American session, will be closely watched. A downward revision of nearly one million jobs could add to the US Dollar’s downward pressure before the Fed Minutes release.
May the trading luck be with you!
