Thursday saw a turbulent market as disappointing US data and ongoing legal battles over Trump’s tariffs sparked volatility. Mixed headlines from Gaza, Ukraine, Iran, and trade talks between the US, China, Japan, and others added to the uncertainty. Markets also took a cautious stance ahead of the US Core PCE Price Index, the Fed's key inflation measure, which fueled the US Dollar's rebound.
In legal news, the US appeals court temporarily reinstated Trump’s tariffs while a second court blocked them in a case brought by a toy company. Despite this, US Treasury Secretary Scott Bessent and White House Advisor Navarro defended Trump’s trade policies, expressing optimism for regaining power permanently, even through loopholes. Meanwhile, Japan voiced concerns about the impact of tariffs on trade and business, despite the ongoing US-Japan trade talks. Global tensions continued as Israel signed a ceasefire in Gaza, while Hamas remained silent. The US, meanwhile, prepared to export more weapons to Taiwan, and a long-awaited China-Japan trade deal neared completion.
On the economic front, the US Q2 GDP showed a contraction in economic activity, albeit at a slower pace. However, jobless claims improved, and Fed officials, including Chairman Jerome Powell, stressed the data-driven nature of their approach while acknowledging concerns about inflation and growth challenges. Other global data showed weak retail sales in Australia, rising inflation in Japan, and worsening sentiment in New Zealand. US crude oil inventories also saw an unexpected drop for the week.
Against this backdrop, the US Dollar Index (DXY) snapped a three-day winning streak before rebounding, putting pressure on Gold and major currencies. Crude oil prices stayed under pressure, and cryptocurrencies pared their weekly gains, while equities edged lower despite a mild positive close on Wall Street. The Antipodeans (AUD and NZD) failed to recover, despite China’s trade and stimulus efforts, while bond yields showed signs of recovery.
EURUSD saw its biggest daily gain in a week, driven by US Dollar weakness, before retreating on Friday. In contrast, GBPUSD lacked recovery momentum and resumed its downward trend. USDJPY remained under pressure for the second day in a row, as positive Japanese data, including rising Tokyo inflation, fueled concerns of a more hawkish Bank of Japan.
The Euro’s earlier rally lacked strong market support, with cautious ECB remarks and EU policymakers' optimism over reclaiming global economic dominance. Meanwhile, GBPUSD was influenced by BoE Governor Andrew Bailey’s cautious tone and growing doubts about the UK’s trade deal prospects amid rising domestic price concerns. As for USDJPY, Japan’s ongoing trade tensions with the US failed to dampen JPY’s strength, supported by its safe-haven appeal, hawkish BoJ expectations, and Tokyo’s ability to secure trade deals outside the US.
The Australian, New Zealand, and Canadian Dollars stayed under pressure, failing to benefit from Thursday’s US Dollar pullback and dropping further on Friday. This came amid weak Australian retail sales, poor New Zealand consumer confidence, and the Canadian PM's criticism of US policies, along with mixed Canadian data. As a result, AUDUSD and NZDUSD are set for weekly losses, while USDCAD rebounds from its yearly low, eyeing a potential weekly gain ahead of key US and Canadian data.
WTI Crude Oil struggles to maintain momentum despite an inventory draw and Kazakhstan's push for higher prices. Fears over energy demand, OPEC+'s readiness for more output, and Trump's "Drill baby drill" stance weigh on prices, pushing the commodity toward a second weekly loss.
Gold, on the other hand, reverses last week's gains amid market uncertainty and a rebound in the US Dollar. Concerns that Trump may overcome legal hurdles on tariffs and that the Fed may have limited room for rate cuts, despite expectations of a 0.50% cut in late 2025, have pressured the yellow metal. However, demand from China and India, alongside global market indecision, provides some support to XAUUSD.
Bitcoin (BTCUSD) is on track for its first weekly loss in eight, while Ethereum (ETHUSD) remains on course for a second straight weekly gain, despite pulling back from key technical resistance. These moves appear to reflect month-end consolidation among crypto traders, coupled with a lack of major industry news, even as the Trump administration shows support for Bitcoin.
Friday promises to be a busy day with key data releases, including the US Core PCE Price Index, Canada’s GDP, German inflation, and the US Chicago PMI. If the US inflation measure holds firm, it could give the US Dollar more fuel to extend its rebound. Even if the data disappoints, ongoing concerns over Trump’s tariffs, global geopolitics, and month-end consolidation might help the Greenback end the week strong, potentially putting downside pressure on Gold and pushing it toward the $3,180 support level.
EURUSD and GBPUSD could remain under pressure, while USDJPY might extend its recent pullback. AUDUSD and NZDUSD are likely to stay in bearish territory. USDCAD could remain firm, particularly if Crude Oil weakens, impacting Canada’s key exports. Cryptocurrencies and equities may finish the week with mild losses, and bond yields could edge higher.
May the trading luck be with you!
