Forex Today: China's payback weighs on markets, boosts dollar, PMIs, coronavirus figures eyed


Here is what you need to know on Friday, July 24:

A risk-off mood has gripped markets, mostly driven by intensifying Sino-American tensions, but also disappointing data and rising coronavirus figures. Updated disease data and PMIs from all over the world will compete with international tensions. 

Sino-American tensions: China has announced the closure of the US consulate in Chengdu, southwest China, in response for America's shuttering of the consulate in Houston. Beijing says Washington is responsible for the conflict and US Secretary of State Mike Pompeo called the Chinese regime "totalitarian."

Despite the deterioration, investors find solace in the trade deal – the world's second-largest economies seem on track to respect the Phase One accord signed early in the year.

Fiscal stimulus talks: Republicans and Democrats made progress in talks for the next fiscal relief package as the GOP dropped its demand for a payroll tax cut. However, the next round of talks will wait for Monday. One of the urgent topics on the table is extending federal unemployment benefits which expire at the end of the month. 

Double-dip recession? Weekly US jobless claims rose to around 1.4 million in the week ending on July 17, the one when Non-Farm Payrolls surveys are held. Ending the long streak of declining applications raises concerns about the labor market and a potential double-dip recession.

Markit's preliminary US Purchasing Managers' Indexes for July are set to show a return to growth and sales of new homes carry expectations for further recovery. 

See US Existing Home Sales Soar: Housing market metrics improve

US coronavirus cases topped the grim milestone of four million, while deaths surpassed 144,000. President Donald Trump canceled the Florida portion of the Republican convention as the disease rages in the Sunshine state, following on his move earlier this week to call on Americans to wear face masks.

S&P 500 futures and Asian shares responded by extending their losses while the safe-haven dollar made a comeback, recovering some of its losses in recent days.

Gold prices have stabilized below $1,900, the highest since September 2011 after nearing the round number on Thursday. Silver also remains bid. 

EUR/USD is struggling with 1.16 after hitting 1.1625 late on Thursday, the highest since September 2018. The euro continues benefiting from the EU recovery fund agreed early this week, which keeps the continent's bonds bid. Markit's preliminary PMIs for July are set to show ongoing improvement.

See Eurozone PMIs Preview: Return to positive territory may complete bullish week for EUR/USD

GBP/USD is trading around 1.27, paring some of its gains amid dollar strength and the Brexit impasse. EU Chief negotiator Michel Barnier and his British counterpart David Frost took stock of talks on future relations and acknowledged little progress has been made.

The UK GfK Consumer Confidence missed with -27 and retail sales figures for June are eyed. Preliminary PMIs for July are due out later in the day. 

See UK Retail Sales Preview: Comeback continues? Yearly figures, headwinds, could keep cable depressed

The yen is benefiting from safe-haven demand, with USD/JPY dropping below 106.50. Tokyo's coronavirus situation worries officials. 

Commodity currencies are on the back foot amid the risk-off mood, with the Aussie shrugging off upbeat PMIs and the loonie ignoring the gradual advance in oil prices. WTI Oil has consolidated its gains above $41. 

Cryptocurrencies are taking two steps forward, one step back, with Bitcoin taking a breather after topping $9,500. 

More Hot Summer In Markets: Gold, silver, euro, and dollar volatility explained

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