Market sentiment remains slightly positive early Friday, helped by easing concerns over a potential leadership shake-up at the Federal Reserve (Fed) and favoring the US Dollar (USD) regaining ground. This follows former President Donald Trump’s public dismissal of speculation that he plans to fire Fed Chair Jerome Powell. After visiting the Fed’s construction site on Thursday, Trump confirmed there’s “no tension” and no need to remove Powell, mentioning they discussed interest rates.
Adding to the Fed-related news, former Fed official Kevin Warsh indicated he would support a rate cut if he were still part of the central bank. Meanwhile, controversy brews as a Trump-linked fund manager has filed a lawsuit against the Fed, accusing it of excessive secrecy and pushing a political agenda.
Improving sentiment is also fueled by shifting trade dynamics. According to the Wall Street Journal (WSJ), Trump is showing renewed interest in a trade deal with China. Positive signals also came from US-Australia trade talks, where Australia agreed to import US beef. US Treasury Secretary Robert Bassent noted the US is in a “pretty good place” with China on trade, while US Commerce Secretary Howard Lutnick said the European Union (EU) is eager for a deal. However, the Financial Times (FT) reports that the EU is ready to retaliate with heavy tariffs if necessary, despite recent positive talks with the US.
On the geopolitical front, tensions between Thailand and Cambodia have escalated, prompting the United Nations Security Council (UNSC) to call an emergency meeting at 3:00 p.m. ET on Friday. The US Department of Defense (Pentagon) approved new arms sales to Egypt, and Trump expressed willingness to support Ukraine—moves reflecting a broader US strategy to boost arms exports and narrow the trade deficit, even as risks of conflict remain. No formal accusations have been made yet.
Economic data remains mixed and cautious. Flash Purchasing Managers' Index (PMI) data for July indicates softer performance from Germany and the United Kingdom (UK), while the European Union (EU) and the United States (US) posted mixed results. In the US, new home sales inventories jumped to their highest level since 2007—a trend seen in five of the last six recessions—raising alarms. However, US Initial Jobless Claims improved. In Asia, Japan’s Consumer Price Index (CPI) and Services Producer Price Index (PPI) rose. In the UK, GfK Consumer Sentiment dropped and savings surged to the highest level since 2007, showing weaker consumer confidence. Canada’s Retail Sales fell in line with forecasts, declining by 1.1%.
The European Central Bank (ECB) left interest rates unchanged as expected. ECB President Christine Lagarde remained cautiously optimistic, citing improved growth conditions, but also acknowledged challenges to inflation and broader economic risks due to global trade tensions and political instability. Markets now expect no rate cut in September, though the Euro (EUR) failed to gain against the strengthening USD.
In corporate news, Wall Street ended mixed, with Intel Corporation's Q2 earnings missing expectations. The company warned it could exit advanced chip manufacturing within four years if it fails to attract major foundry clients—highlighting ongoing structural challenges.
The US Dollar’s broad rebound pressured major currencies and commodities. Gold extended its decline for the third day, trimming weekly gains despite its safe-haven appeal. Crude Oil held on to its recovery from early July lows but lacked momentum. AUDUSD and NZDUSD pulled back from recent highs, while USDCAD rose for a second straight day, bouncing off six-week-old support.
Cryptocurrencies also lost ground. Bitcoin (BTCUSD) posted a three-day losing streak, while Ethereum (ETHUSD) gave up Thursday’s gains. Meanwhile, bond yields in the US and Japan snapped two-day winning streaks, signaling cautious market positioning ahead of the US Durable Goods Orders report and next week’s Federal Open Market Committee (FOMC) meeting.
The US Dollar’s (USD) rebound and the European Central Bank’s (ECB) inability to sway market optimism, despite keeping policy unchanged and optimistic comments from President Christine Lagarde, have pressured the EURUSD. The pair, which had reached a three-week high, is now on track to post a two-day losing streak by Friday while paring the weekly gains.
Meanwhile, the GBPUSD pair also faces downward pressure, down for a second day after retreating from a two-week high. The UK's mixed PMI data, declining GfK Consumer Confidence, and weak savings figures add to the Pound’s struggles, especially following a lackluster UK Retail Sales report after disappointing June numbers.
In contrast, USDJPY continues its recovery from a two-week low, supported by inflation signals in Japan that align with the Bank of Japan’s (BoJ) hawkish stance. Despite this, BoJ policymakers remain resistant to further rate hikes, at least through 2025. Additionally, US-Japan trade tensions and political challenges in Japan—after Prime Minister Ishiba’s party lost majority control in both houses during the 2024-2025 elections—are likely contributing to the Yen’s weakness.
Despite growing optimism around the US-China trade deal and the Aussie-US trade agreement, which have helped limit the sell-off in AUDUSD and supported NZDUSD, the stronger US Dollar (USD)—driven by Fed concerns ahead of next week’s FOMC meeting—is weighing on the currencies of Australia (AUD), New Zealand (NZD), and Canada (CAD).
Although a rebound in crude oil, Canada’s key export, failed to curb the rise in USDCAD, the pair is still buoyed by weak Canada Retail Sales, US-Canada trade tensions, and mixed signals about the Bank of Canada’s (BoC) actions. Additionally, the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) have shown resistance to further rate cuts, challenging the upside for AUDUSD and NZDUSD.
Gold prices drop for the third straight day, extending their pullback from the $3,435 resistance toward the key $3,341 support, which is a confluence of the 50-day SMA and an upward-sloping trend line from December 2024.
The recent US Dollar rebound and market uncertainty around growing trade and geopolitical tensions are weighing on spot gold (XAUUSD). Additionally, month-end consolidation during its seven-month uptrend may have also contributed to the pullback, even as the Greenback heads toward its first weekly loss in three weeks and paring its first monthly gain in six.
Notably, rising ETF and physical demand from China, central banks, and other major buyers, as highlighted in the latest World Gold Council (WGC) report, has been a major factor driving gold’s previous rally.
Crude Oil pares its weekly loss despite the US Dollar’s rebound, supported by a significant inventory draw and uncertainty around escalating geopolitical tensions that could threaten supply. However, OPEC+ output levels, Trump’s pressure for more oil production, and calls for lower energy prices, combined with the stronger US Dollar, had weighed on WTI earlier, before the market's consolidation sparked a rebound.
Meanwhile, Bitcoin (BTCUSD) extends its three-day losing streak, and Ethereum (ETHUSD) reverses Thursday’s gains, as market anxiety ahead of the White House’s upcoming crypto report, along with month-end consolidation and profit-taking after Crypto Week, puts pressure on the crypto space.
Looking ahead, Germany’s IFO sentiment data for July and US Durable Goods Orders for June will headline Friday’s economic calendar. While these reports may support the US Dollar’s recent rally, especially with easing concerns over Fed leadership and consolidation ahead of next week’s FOMC, they likely won’t provide enough momentum for a busy day.
Instead, traders will likely focus on updates surrounding US trade deals with major economies, Washington’s arms sales, and ongoing Trump-Fed tensions. If talk of more rate cuts gains traction—especially if Trump revisits his stance on firing Powell or backs off his trade deal optimism with China, the EU, and others—the US Dollar could pull back from its recent gains.
Moreover, Trump’s threats to Russia and Iran might reignite geopolitical tensions, and if Wall Street turns positive amid preparations for the FOMC and Apple earnings, the Greenback could reverse its gains. This could help Gold stay above the key $3,341 support, halting its recent decline, while offering some relief to major currencies and cryptocurrencies.
Finally, Crude Oil could see further recovery if sentiment improves, particularly if the US Dollar weakens. Otherwise, markets will likely remain in a cautious mood ahead of a busy first week of August.
May the trading luck be with you!
