GBPUSD drops fortnight low as UK/US PMIs loom

The early-week optimism fades during Wednesday’s Asian session as political anxiety in the US joins the cautious mood ahead of the first readings of July activity numbers from the top-tier economies. This allows the US Dollar Index (DXY) to edge after refreshing the weekly top the previous day, which weighs on the riskier assets and major currencies ex-JPY.

EURUSD remains on the back foot at the lowest level in two weeks as the latest data from Europe appear favoring the European Central Bank’s (ECB) further rate cuts. On the other hand, the GBPUSD also holds lower grounds at a fortnight low despite witnessing upbeat UK wage growth, especially amid political jitters in Britain and looming fears of economic softness.

Meanwhile, USDJPY bucks the trend while posting a three-day losing streak to fall to the lowest level since mid-May amid the Bank of Japan (BoJ) concerns. On the same line is the Gold price as they defend the previous day’s rebound from the 21-day Exponential Moving Average (EMA). It’s worth noting that the Japanese Yen (JPY) and Gold are considered traditional havens and gain momentum during uncertain markets.

AUDUSD, NZDUSD, and USDCAD bear the burden of the first US Dollar and softer commodity prices, not to forget China woes. That said, Crude Oil drops for the fifth consecutive day while pleasing bears at the 10-week low despite higher than expected inventory draw.

BTCUSD justified the US Dollar’s strength to post the biggest daily fall in two weeks, pressured of late. However, the ETHUSD cheered the spot ETH ETF launch to end the day on a positive side, despite posting intraday losses by the press time.

Following are the latest moves of the key assets:

• WTI Crude oil prints a five-day losing streak at the lowest level in six weeks, mildly offered near $77.20 by the press time.
• Gold extends the previous day’s recovery to $2,416 at the latest.
• The USD Index struggles to defend Tuesday’s run-up at the weekly high, sidelined near 104.40 as we write.
• Wall Street closed with minor losses but the Asia-Pacific shares edged lower. Further, equities in Britain and Europe remain pressured during the initial trading hour.
• BTCUSD and ETHUSD both tease sellers by posting mild losses near $65,900 and $3,440 at the latest.

US Dollar recovers ahead of top-tier catalysts…

A lead by the US Republican Party’s Presidential Nominee Donald Trump over his Democratic rival Kamala Harris keeps the market players on their toes due to Trump’s harsh stand on multiple issues ranging from China to the US deficit and the US Dollar devaluation. The same joins geopolitical tensions in the Middle East and the recently growing hawkish bias about the US Federal Reserve (Fed) to underpin the US Dollar Index (DXY) the previous day, despite softer prints of the US Existing Home Sales for June and Richmond Fed Manufacturing Index for July. Additionally roiling the mood and allowing the Greenback to recover is the market’s anxiety ahead of this week’s top-tier data/events starting from today.

Apart from the US Dollar’s recovery, the unimpressive improvements in the Eurozone Consumer Confidence and dovish talks of the ECB policymakers weigh on the EURUSD ahead of today’s preliminary PMIs for Germany and the EU.

GBPUSD failed to cheer strong UK wage growth data and traces EURUSD to decline to a two-week low, down for the second consecutive day by the press time, amid fears of the UK’s economic weakness and the new government’s likely inability to tackle the growth issues. On Tuesday, Reuters came out with the news citing strong wage growth per the industry survey. This joins the previously released official figures to back the Bank of England’s (BoE) readiness to keep the rates higher for longer.

USDJPY remains on the back foot at the lowest level since mid-May, down for the third day in a row, as hawkish concerns about the Bank of Japan (BoJ) gain momentum. Also weighing on the Yen pair is the latest pullback in the benchmark Treasury bond yields and the Japanese currency’s traditional haven status. The same could be cited as the reason for the gold price recovery, in addition to India’s suggestion to lower import duties, which suggests more consumption from one of the world’s biggest gold customers. It should be observed that mixed prints of Japanese PMIs failed to challenge the pair sellers.

Earlier in the day, Australia’s PMIs for July came in mostly downbeat and bolstered the odds of the Reserve Bank of Australia’s (RBA) rate cut, as well as weighed on the AUDUSD amid softer commodity prices and China woes. These catalysts also exerted downside pressure on the NZDUSD despite no major releases from New Zealand. However, dovish concerns about the Bank of Canada (BoC) ahead of today’s BoC Interest Rate Decision and lower prices of Crude Oil propels the USDCAD to a 3.5-month high.

Crude Oil fails to justify the Russian update suggesting Moscow’s reduced Oil supplies, per the OPEC+ agreement, as well as the geopolitical woes, amid growing fears that China’s softening growth will cut the energy demand. In doing so, the black gold prices also ignored a higher-than-expected draw in the weekly US Oil Inventories, per the industry source American Petroleum Institute (API).

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

PMIs, BoC and Weekly Oil Inventories in the Spotlight…

After witnessing lackluster trading in the last two days, the market players are likely to experience magnified volatility as the first readings of July’s PMIs from the top-tier economies decorate the calendar. Also important to watch will be the BoC Interest Rate Decision and the weekly US oil inventory data from the official source, namely the US Energy Information Administration (EIA).

Although the majority of the PMIs are likely to show improvement in activities during July, major attention will be given to the Eurozone, the UK, and the US numbers amid mixed bias about the respective central banks. Should the EU and the UK data provide positive surprises, the EURUSD and GBPUSD might pare the latest losses. However, the odds are high for the US Dollar to cheer upbeat US data, especially amid the sour sentiment. Meanwhile, the BoC’s 0.25% rate cut will propel the USDCAD prices but the BoC Rate Statement should be dovish enough to confirm two more rate cuts in 2024 to keep the pair buyers hopeful. Additionally, Crude Oil may not be able to cheer the inventory draw unless the figures are too drastic. Even so, the US Dollar’s strength and China's woes can keep the energy bears hopeful.