The latest FOMC (Federal Open Market Committee) Meeting Minutes eased market concerns, showing that policymakers are sticking to a data-driven approach despite some pressure for more rate cuts. They highlighted inflation risks while downplaying employment concerns, which helped calm fears of an abrupt policy shift. The Wall Street Journal’s Fed watcher, Nick Timiraos, also supported this view. All these catalysts suggested that Fed Chair Jerome Powell will likely defend the data-dependency approach during his speech at the Jackson Hole symposium, which put downward pressure on the USD.
At the same time, rumors surrounding Fed Governor Lisa Cook’s alleged misconduct regarding property purchases gained attention. Trump called for her firing over claims she misrepresented her properties for lower tax rates. While these actions might not have legal grounds, they raised concerns over the Fed's independence, especially after Trump dismissed the BLS (Bureau of Labor Statistics) Chief despite being unable to remove Powell.
On the geopolitical front, discussions about the U.S. role in the Ukraine conflict intensified. The White House pushed the EU to assume a larger security responsibility while the U.S. would take a more limited role. Trump’s comments about Putin and Russia’s military strength also fueled uncertainty, despite his indirect warning to Moscow to behave. UN Secretary-General António Guterres called for an immediate ceasefire in Gaza to prevent further destruction as Israel accelerated operations to take control of Hamas strongholds.
In China, there was a push for deeper cooperation with Pakistan, Kazakhstan, and Afghanistan, adding to political jitters in the region. This move further highlighted China’s growing influence and its complex geopolitical strategy, particularly in Central Asia.
In Europe, ECB (European Central Bank) President Christine Lagarde noted that while trade deals have been made, they haven’t fully resolved uncertainties. Meanwhile, UK inflation data came in stronger than expected, briefly pushing GBPUSD higher, but it soon retreated as markets doubted the BoE’s (Bank of England) ability to take further action.
Flash PMI (Purchasing Managers' Index) data for August showed stronger-than-expected numbers from Japan and Australia, while New Zealand’s trade figures disappointed. In the U.S., crude oil inventories saw a larger-than-expected drop of -6.014M, which helped WTI crude oil snap a three-day losing streak.
The USD paused its two-day uptrend, with markets adopting a cautious stance ahead of upcoming data releases, including flash PMIs for August from the EU, UK, and U.S., along with Powell’s highly anticipated speech at Jackson Hole. Gold slightly recovered after recent losses, but EURUSD and GBPUSD remained under pressure, with GBPUSD facing a four-day losing streak. Other currency pairs like AUDUSD and NZDUSD struggled, with the latter hitting its lowest level since April following the RBNZ (Reserve Bank of New Zealand) policy decision. Meanwhile, USDCAD stayed bid at a three-month high, up for the third consecutive day, despite a recovery in crude oil and positive housing data from Canada.
Cryptocurrencies ended their two-day losing streak, but equities remained mixed. The Dow Jones Industrial Average closed flat after initial losses, while the Nasdaq and S&P 500 dropped. U.S. Treasury yields edged lower, while yields from Japan remained stable.
Despite bouncing off its weekly low on Wednesday, EUR/USD remains under pressure early Thursday, heading towards its first weekly loss in three weeks. Political concerns over Ukraine and weaker-than-expected domestic data weigh on the pair. Final readings of July’s EU and German inflation confirmed softer numbers, reinforcing the ECB's dovish stance. A cautious mood ahead of today’s EU/US PMIs for August and Friday’s Jackson Hole speech adds further downside pressure, especially as ECB President Christine Lagarde recently highlighted ongoing economic uncertainty despite multiple trade deals from the U.S.
GBP/USD falls for the fourth straight day, reaching its weekly low, despite Wednesday’s stronger-than-expected UK inflation data hinting at a pause in the BoE’s rate cuts. However, mixed UK growth, output, and employment data, along with political instability and waning confidence in the new government, continue to weigh on the pound, even with a softer U.S. Dollar.
Meanwhile, USD/JPY halts its two-day losing streak, despite a Reuters poll suggesting the BoJ (Bank of Japan) may hike rates in 2025 and strong Japan PMI data. This could be due to market consolidation ahead of Friday’s Jackson Hole speech by Fed Chair Jerome Powell, along with speculation that BoJ Governor Ueda remains cautious about further rate hikes unless necessary.
Despite the U.S. Dollar pausing, the Australian Dollar (AUD), New Zealand Dollar (NZD), and Canadian Dollar (CAD) remain weak amid market anxiety ahead of key events and mixed domestic data, alongside expectations of more rate cuts from their respective central banks. Both AUDUSD and NZDUSD have dropped for four consecutive days, with AUDUSD hitting its lowest since late June and NZDUSD extending losses post-RBNZ to a four-month low.
Meanwhile, USDCAD rises for the third straight day, approaching a three-month high. This upward move continues despite a recovery in crude oil prices and a slight improvement in Canadian housing data. The strength in USDCAD is likely linked to mixed inflation readings from Canada earlier in the week, ongoing U.S.-Canada trade and political tensions, and the Bank of Canada’s (BoC) dovish stance.
The latest U.S. official weekly crude oil inventory data from the EIA showed a surprise depletion in stockpiles, confirming industry reports from the API. As a result, WTI crude oil snapped its three-day losing streak. The recovery in oil prices is also likely driven by growing concerns over the Russia-Ukraine peace deal and the U.S. Dollar’s retreat.
Meanwhile, Gold remains under pressure, struggling to hold onto the previous day’s bounce due to a pullback in the USD. Market uncertainty, along with fears related to China and expectations of a potentially hawkish speech from Fed Chair Powell at Jackson Hole, are keeping gold buyers cautious.
The U.S. Dollar paused its two-day losing streak on Wednesday, boosted by statements from U.S. government and Fed officials supporting stablecoins. However, the recovery faded early Thursday as traders remained cautious ahead of the U.S. PMIs and Friday’s Jackson Hole speech of Fed Chair Powell. Technical patterns and the liquidation of leveraged crypto positions also attracted sellers, keeping the dollar under pressure.
With the preliminary readings of the EU, UK, and US PMIs for August, along with U.S. weekly jobless claims, preliminary Eurozone consumer confidence, the U.S. Philadelphia Fed manufacturing survey, and existing home sales on the calendar, traders are set for another busy day. Alongside these, discussions surrounding the U.S. role in the Ukraine-Russia peace deal, the EU's response, and China's growing ties with Pakistan, Kazakhstan, and Afghanistan will keep market participants engaged.
The market's focus will remain on the upcoming Zelenskyy-Putin meeting and Fed Chair Powell’s speech at Jackson Hole, which will play a key role in driving market sentiment. If more risk-negative headlines surface and the Fed’s dovish bias recedes, the U.S. Dollar might reverse its recent pullback, putting pressure on EURUSD, Gold, and the Antipodean currencies. On the other hand, USDJPY and crude oil might respond differently, while cryptocurrencies could face further selling amid the uncertainty. Equities may also drift lower, especially if Walmart's pre-market results disappoint, following the underwhelming outcomes from Home Depot and Target.
May the trading luck be with you!
