The dollar index rose to 97.8 but ended the week lower, as traders weighed trade progress and awaited the Fed’s decision. The Fed is expected to hold rates steady, with two cuts priced in by year-end. The euro neared $1.175, its highest since 2021, supported by the ECB’s rate pause and geopolitical concerns. The yen edged up after a 15% tariff cap on Japanese goods, while persistent inflation kept BOJ hike expectations alive. The pound slipped to $1.347 as weak UK data fueled bets for a BoE cut in August.
Gold eased slightly as tariff-related fears faded. Improved jobless data and steady Fed expectations also weighed on safe-haven demand. Silver gave back gains after climbing earlier in the week, reflecting reduced trade uncertainty. Brent crude fell amid expectations of higher Venezuelan output and eased export disruptions, though trade optimism offered some support.
The U.S. 10-year yield held around 4.41% after trade headlines and ahead of the Fed meeting. Markets expect two rate cuts by year-end, starting in September. In Germany, the 10-year Bund yield rose above 2.7% after the ECB paused and trimmed further cut expectations. The UK 10-year gilt climbed to 4.65% as uneven retail data and softer PMI prints increased rate-cut bets. Japan’s 10-year yield tested a 17-year high, fueled by weak demand at bond auctions and lingering trade risks, while inflation stayed above the BOJ’s target.
The ECB kept interest rates unchanged in July, pausing its easing cycle after eight cuts over the past year. The main refinancing rate holds at 2.15% and the deposit facility at 2.0%. Inflation reached the ECB’s 2% target in June, giving policymakers room to wait and assess trade risks. President Lagarde said the eurozone is “in a good place,” though the impact of tariffs remains uncertain. She also noted that while the ECB doesn’t target exchange rates, currency moves factor into inflation forecasts.
US initial jobless claims fell to 217,000, beating forecasts of an increase. This marked the sixth straight weekly decline and the lowest level since April, reflecting continued labor market resilience. However, continuing claims rose to 1.955 million, near a multi-year high, suggesting slower hiring. Federal employee filings surged to a four-month high amid recent government layoffs, highlighting uneven employment trends.
The S&P Global US Manufacturing PMI dropped to 49.5 in July, slipping below the 50-mark and signaling contraction for the first time since December. Production growth slowed and new orders fell, dragging the index down from a 37-month high in June. Employment and inventories declined, though supplier delivery times improved, indicating easing supply chain pressures. The data points to a cooling in factory activity despite a strong start to the year.
The S&P Global Services PMI rose to 55.2 in July from 52.9, showing the sharpest expansion in the US services sector since January. Business activity accelerated on stronger domestic demand, while backlogs rose and hiring hit a seven-month high. Input costs increased more sharply, and firms passed on the higher costs to customers. Despite a dip in foreign demand, the overall services sector remained a key driver of US growth.
The HCOB Eurozone Manufacturing PMI, compiled by S&P Global, edged up to 49.8 in July, showing the mildest contraction in two years. Output rose slightly, and job cuts slowed. However, new orders continued to shrink, indicating ongoing demand weakness. Input prices fell marginally, and output prices stabilized after two months of decline. Confidence dipped as firms remained cautious about the outlook.
The HCOB Eurozone Services PMI, also from S&P Global, climbed to 51.2 in July, a six-month high. The sector saw faster growth in activity and the first rise in new business in six months. Employment also increased, reflecting stronger demand. While cost inflation eased, business sentiment declined slightly, suggesting lingering concerns over geopolitical and trade risks.
US durable goods orders fell 9.3% in June to $311.84 billion, reversing a strong 16.5% jump in May. Transportation orders plunged, nondefense aircraft dropped by over 50% while core capital goods dipped 0.7%, which signaled softer business investment. Ex-transportation orders rose modestly. The figures suggest a volatile but cooling demand environment as firms reassess spending amid trade and rate uncertainties.
The dollar index rose to 97.8 on Friday but still posted a 0.8% weekly loss, the worst in a month, as markets digested mixed trade signals and looked ahead to the Fed meeting. Two rate cuts remain priced in for 2025.
The euro held firm near $1.175, which is its strongest since August 2021, after the ECB paused rate cuts, having already reduced the deposit rate from 4% to 2%.
The yen gained slightly as the US capped tariffs on Japanese goods at 15%, easing trade concerns. With Tokyo inflation above target, the BOJ may revise forecasts but is expected to hold rates steady.
The British pound slipped to $1.347 amid weak UK retail sales and PMIs, increasing expectations for an August BoE rate cut.
Gold ended the week slightly lower as risk appetite improved with progress on global trade deals. The Fed is expected to hold rates next week, but September easing remains on the table. Jobless data reinforced the Fed’s patience, while political noise between Trump and Powell over Fed expenses added some drama without altering the policy outlook.
Silver saw early gains but ended lower by about 3%, reflecting reduced safe-haven demand as a 15% US-EU tariff agreement seemed likely. An extension of the US-China trade truce further lifted sentiment.
Brent crude slipped as the US considers easing restrictions on Venezuelan oil partners. Export disruptions through the Black Sea and Turkey faded, while optimism over trade deals with the EU and Japan improved the overall tone. The market now turns to the upcoming OPEC+ meeting, where no major policy changes are expected.
US equities posted solid weekly gains, with the S&P 500 rising 1.2% to a fresh all-time high. The Nasdaq added 0.7%, and the Dow climbed 0.7% as well. Strong tech performance led by Google’s 5% jump drove sentiment, while Apple and Nvidia posted smaller gains. Tesla fell 5%, slightly offsetting broader strength. Investors are now eyeing next week’s Fed decision and key earnings releases.
Markets on Thursday leaned toward a dovish global outlook, lifting precious metals and reshaping major currency moves.
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