Forex Today: Dollar gains traction as mood sours ahead of PMI data

Eren Sengezer FXStreet

Here is what you need to know on Friday, July 22:

Although the euro gathered strength following the European Central Bank's (ECB) decision to hike its key rates by 50 basis points, it lost its bullish momentum early Friday amid the negative shift witnessed in risk sentiment. The US Dollar Index edges higher toward 107.00 in the European session and US stock index futures are down between 0.3% and 0.8%. S&P Global will release the flash Manufacturing and Services PMI surveys for Germany, the euro area, the UK and the US on Friday. The Canadian economic docket will feature May Retail Sales data.

In addition to the double-dose rate increase, the ECB unveiled its new anti-fragmentation tool called the Transmission Protection Instrument (TPI). The bank also abandoned forward guidance by noting that every meeting will be live and that they will assess the data when making a decision. ECB President Christine Lagarde refrained from sharing key details regarding the TPI during the press conference. Meanwhile, Italian President Sergio Mattarella has dissolved the Italian parliament, triggering a snap election on September 25.

After having advanced toward 1.0300, EUR/USD erased a portion of its daily gains and closed in positive territory near 1.0250 on Thursday. The pair trades near 1.0200 early Friday.

GBP/USD closed virtually unchanged near 1.2000 on Thursday but started to push lower toward 1.1950 on Friday. The data published by the UK's Office for National Statistics showed earlier in the day that Retail Sales declined by 0.1% on a monthly basis in June. In 12 months to June, sales were down 5.8%, compared to the market expectation for a contraction of 5.3%.

Pressured by the sharp decline witnessed in US Treasury bond yields, USD/JPY fell to its lowest level in over a week near 137.00 but managed to reverse its course ahead of the weekend. With the benchmark 10-year US Treasury bond yield holding in positive territory following Thursday's 5% drop, the pair rises toward 138.00. The Japanese Finance Minister, Shunichi Suzuki, said on Friday that hiking rates could knock the economy's recovery, signalling support for the Bank of Japan's stance to keep monetary stimulus despite a global tightening trend amid rising inflation.

Gold finally capitalized on falling yields on Thursday and rose toward $1,720. XAUUSD stays relatively quiet near that level on Friday and clings to modest weekly gains.

Bitcoin continues to move sideways near $23,000 after having closed the previous two days virtually unchanged. Ethereum pushes higher toward $1,600 early Friday following Thursday's 3.5% gain.

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.

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EUR/USD drops to fresh weekly lows below 1.1650

EUR/USD stays on the back foot and trades at its lowest level in a week below 1.1650 on Thursday. The European Central Bank's policy meeting accounts fail to help the Euro stay resilient, while the cautious market mood supports the USD and weighs on the pair. Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday will be critical for the pair's next direction.

Gold holds steady around $4,600 as traders eye Fed's Warsh for rate cues

Gold languishes near the $4,600 mark through the first half of the European session on Thursday and remains close to the weekly low it touched the previous day. The downside, however, seems limited as traders opt to wait for US Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday for cues on the future policy path. The outlook, in turn, will play a key role in influencing the US Dollar price dynamics and provide some meaningful impetus to the non-yielding bullion.

Ripple eases to $1.40, Solana hits $100, DOGE capped below $0.10

Ripple (XRP) and Dogecoin (DOGE) are facing downside pressure after double-digit gains last week, while Solana (SOL) extends its rally to $100. The technical outlook for XRP, SOL, and DOGE points to potential upside as the broader market sustains a risk-on sentiment.

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Kevin Warsh’s Jackson Hole dilemma: Say too much, too little, or just enough

Kevin Warsh is preparing to deliver his first Jackson Hole speech as Federal Reserve (Fed) Chair on Friday, and expectations extend well beyond whether interest rates will be raised or left unchanged in September.