United States
The initial expectation was that after reaching lows in early July, the greenback would retrace its previous downward movement starting around June 23, with signs of this ending by July 17. Although a slight pullback was anticipated last week, recent price actions suggest the dollar’s upward correction may not yet be complete. This becomes more complicated due to the upcoming busy week, where each of the G7’s central banks, specifically the Federal Reserve, Bank of Japan, and Bank of Canada, are scheduled to meet. Key economic data such as the US and eurozone’s Q2 GDP estimates, the eurozone’s preliminary July CPI, and the US PCE deflator will be released. Following a potential trade agreement between US President Trump and EC President von der Leyen and meetings involving top US and Chinese officials, the US seems inclined to extend the tariff truce for another 90 days from August 12. A potential shift in Fed policy and a faltering US labor market might create tension against a broadly positive dollar outlook.
The US macroeconomic calendar is among the year’s busiest, with June trade figures indicating a shortfall approximately 30% larger than the first half of the previous year. The Q2 GDP’s annualized rate might exceed 2.0% for the last time over the coming quarters. Concerns loom towards personal income, consumption data, and inflationary pressures indicated by rising deflators. A closely watched non-farm payroll report is due, with job growth estimated to have decelerated to around 100k, alongside a possible uptick in the unemployment rate. Although FOMC is expected to refrain from action, potential dissent from Governor Waller and possibly Bowman could signify a dovish stance on holding rates.
There is ongoing litigation in international trade regarding the legality of tariffs under the International Emergency Economic Powers Act. Regardless of initial outcomes, appeals to the Supreme Court appear likely. In terms of the Treasury, significant announcements about quarterly refunding plans and a substantial amount of bonds and bills are on the horizon.
Dollar movements have been volatile yet resilient, with potential increases above the 98.00-98.25 range hinting at a possible retest of high points around 99.00 and even 99.40-60.
Eurozone
The European Central Bank recently decided not to alter rates, and market predictions show no significant rate cuts anticipated soon, although there is a 64% implied chance of a cut by December. Tensions surrounding US-EU trade policies are noticeable, with the US possibly enforcing universal European tariffs.
Upcoming data highlights include the eurozone’s Q2 GDP, with predictions ranging from a minor contraction to stagnation. Additionally, the eurozone’s July CPI could present an increase in the annual rate due to base effects while remaining a potential volatility source.
Commodity exchange indicated a euro halt near $1.1790, with underlying downside risks if $1.1650 is broken, potentially signaling sharper declines towards $1.1540 and $1.1450.
United Kingdom
Sterling remains largely influenced by US dollar movements, with high correlations noted against both dollar and euro changes. The UK’s economy previously led G7 growth but showed signs of stalling in Q2. Upcoming consumer credit and mortgage lending data are unlikely to strongly influence market movements.
The British pound’s recent trajectory has been downward, hitting a two-month low recently and experiencing lackluster recovery. Key observational levels include $1.3365-70, potentially forming a head and shoulders pattern with downside targets nearing $1.2940.
China
China’s currency policy seeks stability against US dollar movements. The Sino-American trade truce’s status comes under review as US and Chinese officials meet, potentially extending the truce. Economic management often overshadows currency exchange, although data like July PMI on July 31 will give insight into marginal trends.
Recent lows in the dollar’s value against the yuan suggest near-term stability, with further upward movements likely to follow if broader dollar strength returns.
Japan
In Japan, exchange rates often correlate more effectively with US 10-year yields rather than purely domestic influences. Recent indicators include retail and industrial figures, with notable interest in the upcoming Bank of Japan meeting. It is generally expected that Japan will not change its current policy stance but may update economic projections. Concerns remain around US tariffs’ impacts amid potential trade deal revelations.
US dollar dynamics indicate a potential testing phase nearing JPY148, possibly revisiting highs, with underlying averages potentially providing resistance levels.
Canada
The Canadian dollar, closely linked with US dollar movements, is less influenced than presumed by oil prices, despite perceptions. With impending Bank of Canada meetings, the outlook remains for steady rates currently, despite slight Q2 economic contractions.
Recent low points for the dollar against the Canadian currency may shift higher if key resistance at CAD1.3780 is breached, potentially leading to upward testing toward CAD1.3835-65.
Australia
Movements in the Australian dollar closely follow Canadian dollar trends and broader dollar index dynamics. Commodity correlations are less stable than commonly believed. Upcoming economic reports focusing on CPI and retail sales will bear watching due to potential implications for central bank rate adjustments.
The national currency, which has retreated from recent highs, shows support near $0.6550, with the potential for further declines ahead of emerging structural movements.
Mexico
The peso perseveres as a compelling investment, given its yield advantages and liquidity, although responsive to overall dollar trends. Mexican economic indicators shortly anticipated include unemployment rates and Q2 GDP, colorfully oscillating amid historical trade balance adjustments.
A newfound low for the dollar against the peso suggests potential for consolidation and advances, with movement scenarios towards MXN18.66-MXN18.70, waiting for further evaluation.
