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A series of weaker-than-expected inflation reports for both producers and consumers in the U.S. has strengthened the case for the Federal Reserve’s first interest rate cut since December 2024. In response, the U.S. Dollar (USD) has resumed its decline as the week’s busy economic calendar concludes with the release of the University of Michigan Consumer Sentiment Index.
U.S. Dollar (DXY)
The U.S. Dollar Index (DXY), which tracks the dollar against six other currencies, fell by 0.26% to 97.54. Although recent price action suggests the dollar may have found a floor, downside risks persist. The latest Initial Jobless Claims data reinforced the ongoing weakness in the labor market, adding to the pressure on the Fed ahead of next week’s Federal Open Market Committee (FOMC) meeting.
EUR/USD
The Euro (EUR) recovered some ground against the dollar after the European Central Bank (ECB) held rates steady. ECB President Christine Lagarde announced that the disinflationary process is over, which helped the shared currency climb back above the 1.1700 mark. The ECB is expected to keep rates unchanged for the remainder of the year.
GBP/USD
The British Pound (GBP) reclaimed the 1.3500 level and looks poised to test 1.3600 as traders await the release of Gross Domestic Product (GDP) figures. The monthly reading is expected to be flat at 0%, while the yearly growth is forecast to accelerate to 1.1% from 0.2% in June.
USD/JPY
The U.S. Dollar turned negative against the Japanese Yen (JPY) as U.S. data prompted a dollar sell-off. Traders are now eyeing the 147.00 mark. Upcoming Japanese Industrial Production and Capacity Utilization data for July could provide insight into the manufacturing sector’s health, particularly amid the political uncertainty following Prime Minister Ishiba’s resignation.
AUD/USD
The Australian Dollar (AUD) soared to a new yearly high of 0.6664 and is now positioned to test 0.6700. With no significant economic data due from either Australia or China, market sentiment is expected to be the primary driver of the Aussie Dollar’s movement.
Gold (XAU/USD)
Gold prices are struggling to gain momentum despite the softer Greenback. The precious metal is expected to remain in a tight range between $3,630 and $3,650 as market participants fully process the latest round of U.S. economic data.
