Risk sentiment remains slightly positive early Thursday, despite mixed trade headlines and caution ahead of key events: U.S. President Donald Trump’s visit to the U.S. Federal Reserve (Fed), the European Central Bank (ECB) Monetary Policy Meeting, Global PMIs for July, and EU-China trade talks.
On Wednesday, weaker U.S. existing home sales allowed Trump to blame Fed Chairman Jerome Powell for the housing market slowdown. However, U.S. Treasury Secretary Bassent assured that Trump doesn't plan to remove Powell. Meanwhile, strong second-quarter (Q2) earnings from U.S. tech giants, except for Tesla’s disappointing Earnings Per Share (EPS), weighed on the U.S. Dollar and supported riskier assets, though momentum remained cautious.
Trump also made headlines discussing the potential for 15% to 50% tariffs on certain countries and reported progress in trade talks with the European Union (EU) and China. Bassent noted that EU talks were improving and even warned Japan of a possible 25% tariff if trade issues weren’t addressed. Additionally, Bassent hinted at 1-2 rate cuts this year, in line with the Fed’s expectations, easing pressure on Powell and the central bank.
On the other hand, White House economic advisor Peter Navarro downplayed recent reports from the Financial Times suggesting a potential EU trade agreement, calling it speculative. Meanwhile, South Korea canceled its trade talks with the U.S. due to scheduling conflicts, though the U.S. proposed resuming discussions soon.
In Russia, Vladimir Medinsky, an aide to President Vladimir Putin, claimed all humanitarian agreements with Ukraine had been finalized. However, tensions remain, especially with the U.S. State Department’s approval of a potential $172 million sale of Hawk Phase 3 missile systems to Ukraine. Additionally, clashes erupted early Thursday between Thai and Cambodian forces along their disputed border.
Japan’s preliminary PMIs for July showed weak performance, while Australia’s numbers exceeded expectations. Coupled with less dovish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock, the Australian Dollar (AUDUSD) surged to its highest level since November 2024, continuing a five-day rally. Similarly, the New Zealand Dollar (NZDUSD) followed suit, reaching a two-week high. Meanwhile, the USDCAD pair snapped a four-day losing streak, hitting a two-week low, supported by weaker crude oil prices, steady Canadian housing data, and mixed U.S.-Canada trade headlines.
Crude oil recovered slightly after a three-day losing streak, following a higher-than-expected draw in U.S. crude inventories. Gold stayed defensive after pulling back from a six-week high.
In the U.S. stock market, the Nasdaq and S&P 500 closed at record highs, while the Dow Jones was just four points shy of its all-time high from December 4, 2024. Strong earnings from companies like Google’s parent Alphabet, ServiceNow, Chipotle, IBM, T-Mobile, and CSX favored Wall Street optimists, while Tesla faced its largest quarterly revenue drop in over a decade. Despite this, CEO Elon Musk expressed optimism about European sales accelerating.
Bond yields continued to rise, and cryptocurrencies saw mixed performance after a solid week, as traders anticipate the White House’s cryptocurrency policy report, expected on July 30.
Amidst all of this, the U.S. Dollar Index (DXY) fell for a fifth straight day, reaching its lowest point in 13 days. This allowed EURUSD to hold firm at a two-week high, despite ongoing U.S.-China trade tensions and expectations of a dovish ECB. GBPUSD struggled to maintain its three-day winning streak, while USDJPY dropped to a two-week low, completing a four-day losing streak.
The ECB is expected to keep interest rates unchanged after a year of cuts, but it can’t afford to stay overly optimistic given the latest data and ongoing trade tensions with the U.S. and China. This, combined with likely weaker economic data from Germany and the EU, could put pressure on EURUSD bulls, who have pushed the pair to its highest levels in over two weeks during a five-day rally. Even so, Trump’s criticism of U.S. data and his disapproval of the Fed’s actions may continue to weigh on the U.S. Dollar, helping the Euro maintain its gains despite limited positive news from the Eurozone. This scenario could keep major currency traders uncertain, struggling to find clear direction.
GBPUSD remains uncertain at a two-week high after a three-day winning streak. With July PMIs from both the UK and the U.S. likely to show cautious performance in manufacturing and services, the outlook remains murky. Growing concerns that the U.S. might push the UK toward higher tariffs also add to the tension, especially if more talk surfaces about Washington favoring Britain while being partial to other global players.
Meanwhile, USDJPY benefits from the Japanese Yen’s safe-haven appeal, as traders remain skeptical about any significant positives from the U.S.-Japan trade deal. In doing so, the USDJPY traders ignore downbeat Japan PMIs for July. That said, challenges for the Bank of Japan (BoJ) and political uncertainty following Japan's latest elections could push Japanese investors to seek safety in the Yen and Japanese bonds. That said, broader trade and political jitters, along with the Trump-Fed feud, could strengthen the bearish bias for USDJPY unless the U.S. Dollar surges — an outcome that seems unlikely for now.
Strong Australian Purchasing Managers' Indexes (PMIs) and less dovish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock powered a five-day winning streak in AUDUSD, pushing the pair to its highest level since November 2024. NZDUSD followed suit, climbing to a two-week high, even as Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway warned that tariffs would lead to a weaker global economy and reduced demand.
Both the Australian Dollar (AUD) and New Zealand Dollar (NZD) also received support from the positive sentiment surrounding the US-China trade deal, Beijing's readiness to implement more stimulus, and expectations that the RBA and RBNZ might reduce the likelihood of further rate cuts.
Elsewhere, USDCAD ended a four-day losing streak and bounced off a six-week support level, despite weaker crude oil prices, although a higher-than-expected draw in U.S. crude oil inventories provided some support. The Loonie pair’s rebound could also be linked to the unchanged, weak Canadian housing data and ongoing uncertainty in U.S.-Canada trade talks.
Gold is holding steady after pulling back from a six-week high, posting mild losses as traders engage in month-end consolidation amid a cautious mood ahead of this week’s key economic data and events. The metal’s inability to break above the $3,435 technical resistance is also limiting buying interest.
Meanwhile, crude oil stays near its lowest level since July 1, pausing a three-day losing streak. Despite a surprisingly large drop in weekly U.S. crude inventories, traders await clearer signals before extending losses. Support for oil prices may come from positive developments in U.S.-China trade talks and renewed U.S.-Iran tensions. However, concerns over rising OPEC+ supply, reduced energy demand due to ongoing tariff conflicts, and pressure from Donald Trump for lower oil prices continue to weigh on the market.
Bitcoin (BTC/USD) extends its decline from the previous day, while Ethereum (ETH/USD) posts a three-day losing streak after recently hitting a new yearly high. Crypto traders have turned cautious ahead of this week’s key economic data and the upcoming White House crypto policy report, due on July 30, despite continued strong institutional interest in the space.
Thursday is shaping up to be a busy and potentially pivotal day, with several high-impact events lined up. These include the preliminary Purchasing Managers' Index (PMI) readings for July from the European Union, Germany, the United Kingdom, and the United States; the European Central Bank’s (ECB) monetary policy meeting; former President Donald Trump’s visit to the Federal Reserve; and trade discussions between the European Union and China. If risk sentiment deteriorates, the day could turn into a “Turnaround Thursday.”
The ECB is not expected to change its monetary policy stance, but it also cannot afford to sound overly hawkish. This could challenge EUR/USD buyers, unless the U.S. Dollar weakens significantly. Global PMIs may improve slightly from June, but likely not enough to spark sharp rallies in the respective currencies.
Meanwhile, any renewed criticism of the Fed from Trump could put additional pressure on the U.S. Dollar, supporting gains in other major currencies and risk assets. However, cryptocurrencies may struggle, as traders unwind hedged positions and adopt a more cautious stance ahead of the White House's upcoming crypto policy announcement, due on July 30.
Equities are likely to remain firm, buoyed by mostly positive earnings reports from major technology companies. In contrast, bond yields and gold could face slight pressure, while crude oil may slip further—unless U.S.-Iran tensions escalate and reignite concerns over supply disruptions.
May the trading luck be with you!
