Forex Today: A quiet start to the third quarter ahead of key data releases

Eren Sengezer FXStreet

Here is what you need to know on Friday, July 1:

Following a volatile American session amid soft US inflation data and month-end flows on Thursday, markets stay relatively calm early Friday. Nevertheless, investors remain cautious ahead of June inflation figures for the euro area. In the second half of the day, the ISM Manufacturing PMI report will be featured in the US economic docket. The US Dollar Index recovers modestly toward 105.00 and the US stock index futures trade deep in negative territory.

ISM Manufacturing PMI Preview: High inflation component steal the show, boost dollar.

In an interview with Austrian newspaper Oberoesterreichische Nachrichten, European Central Bank (ECB) policymaker Robert Holzmann noted that he would have preferred the bank to hike its policy rate earlier. Eurostat is expected to report that the annual Harmonised Index of Consumer Prices (HICP) rose to 8.3% in June from 8.1% in May.

Eurozone Inflation Preview: Core holds the keys, with 4% set to trigger a EUR/USD rally.

Earlier in the day, the data from China showed that the Caixin Manufacturing PMI improved to 51.7 in June from 48.1 in May but this print doesn't seem to be having a positive impact on market sentiment in the early European session.

Meanwhile, cure oil prices fell sharply after OPEC+ decided to stick to its current plan of increasing the output by 648,000 barrels per day in August. The group refrained from discussing the output strategy from September. The barrel of West Texas Intermediate (WTI), which fell more than 3% on Thursday, was last seen losing 0.8% on the day at $105.15.

EUR/USD staged a decisive rebound during the American session and ended up closing in positive territory on Thursday. The pair stays on the back foot early Friday and edges lower toward 1.0450.

GBP/USD registered small daily gains on Thursday but turned south early Friday. The pair was last seen retreating toward 1.2100.

USD/JPY fell sharply on Thursday amid falling US Treasury bond yields. With the benchmark 10-year US T-bond yield losing nearly 2% below 3% so far on the day, the pair trades in negative territory below 135.00 in the European morning.

Gold failed to take advantage of falling yields and closed the fourth straight day in negative territory. Sellers continue to dominate XAU/USD's action early Friday with the pair trading below $1,800 for the first time since mid-May.

Although Bitcoin climbed above $20,000 on Friday after having dropped below that level on Thursday, it failed to preserve its recovery momentum and was last seen trading near $19,300. Ethereum continues to trade within a touching distance of $1,000.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

GBP/USD advaces beyond 1.3450 after BoE decision, US Q2 GDP

GBP/USD gains positive momentum on Thursday, surpassing 1.3450 and trading at fresh multi-week highs. The Bank of England decided to maintain the benchmark rate unchanged at 3.75%. The MPC voted 6-3 to keep rates on hold, with the 3 dissenters favoring a rate hike. US Q2 GDP missing expectations helped the pair advance, while renewed US Dollar weakness across the FX board pushed the pair further up ahead of the monthly close.

EUR/USD confortable around 1.1530, highest in six weeks

The EUR/USD pair trades around 1.1530 in the American session on Thursday, reaching fresh six-week highs. The US Dollar is in sell-off mode, with multiple factors weighing on the American currency. Not only did the Federal Reserve vote divided to keep rates on hold on Wednesday, creating doubts about a September hike, but US Q2 GDP missed expectations. A suspected JPY intervention adds pressure on the Greenback.

Gold recovers the $4,100 level as US Dollar weakens further

Gold trades just above $4,100 amid a US Dollar sell-off. The Greenback enjoyed some near-term demand following Wednesday's post-FOMC downfall, but was unable to retain its gains. The preliminary estimate of the US Q2 GDP showed the economy grew at an annual rate of 1.5%, missing the market's expectations of 2.1%.

Bank of Japan set to keep interest rates unchanged after suspected Yen intervention

Investors are turning their attention to the Bank of Japan’s monetary policy announcement on Friday, after the Japanese Yen staged a dramatic rebound during Thursday's American session. The move came amid growing speculation that Japanese authorities intervened in the foreign exchange market after USD/JPY tumbled from above 163.00 to below 158.00 within minutes.

The FOMC: Rates left on hold; dollar falls as Warsh fails to vote for hike

The Fed kept interest rates on hold today, defying a 30% chance in the Fed Funds Futures market that rates would rise. The Committee voted 9-3 to keep rates on hold, with governors Kashkari, Hammack and Logan all voting to hike rates due to concerns about inflation. The immediate market reaction has been a sharp drop in the USD on a broad basis.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.