Forex Today: Dollar's downward spiral continues

During the Asian session, Japan will release Industrial Production data. Later in Europe, Germany will release wholesale June inflation, the European Commission's economic growth forecast, and trade balance data. Later in the day, US Consumer Confidence and Canadian Manufacturing Sales are due. The US Dollar's decline remains in the spotlight.

Here is what you need to know on Friday, July 14:

The US Dollar dropped sharply again after the release of more inflation data from the US. The figures offer signals that inflation continues to cool, triggering more gains in Wall Street and Treasury bonds.

The US Producer Price Index (PPI), which peaked at 11.2% in June 2022, rose 0.1% in June from a year ago, the lowest reading since August 2020. Labor market data showed Initial Jobless Claims totaled 237K in the week ended July 8, below the 249K of the previous week. Despite inflation cooling, the Federal Reserve (Fed) is on its way to raise interest rates by 25 basis points on July 26. However, market participants are increasing bets that it will be the last hike of the tightening cycle. Those expectations are driving the US Dollar lower. On Friday, the University of Michigan will release its Consumer Confidence report.

The US Dollar Index (DXY) dropped below 100.00, reaching its lowest level since April 2022. The DXY has fallen for six consecutive days and is not showing signs of stabilization. The bearish Dollar's momentum remains strong and could lead to further losses.

Wall Street cheered inflation figures again. The Dow Jones rose 0.14%, the S&P 500 gained 0.85% (highest close since April 2022), and the Nasdaq rose by 1.58%. Commodities also rose further, with Silver extending weekly gains with a 3% gain to $24.85, while Gold remained steady hovering around $1,960.

The upbeat tone across equity markets remained despite weak June trade data reported by China early on Thursday. Exports fell 12.4% YoY (the largest contraction since February 2020) and imports rose 6.8%, both worse than expected. The numbers increase the pressure on Chinese officials to introduce more stimulus.

EUR/USD soared to 1.1225, remains at the highs, as the bullish momentum remains intact. The European Central Bank (ECB) minutes pointed to another rate hike in July. On Friday, the European Commission will release economic growth forecasts and trade balance data.

GBP/USD posted another daily gain, as it has been the case since the beginning of the month. The pair broke above 1.3000 and also 1.3100, to the highest level in 15 months. UK GDP data showed a contraction in May of 0.1%, better than the expected -0.3%. Industrial Production indicators also showed a decline in May, but less than forecasted. The Pound remains strong even as tightening expectations from the Bank of England soften.

USD/JPY fell for the sixth consecutive day, reflecting the weakness of the Dollar and lower government bond yields, falling towards 138.00. The Japanese currency gained ground versus other currencies amid risk appetite.

Antipodean countries continue to benefit from the weaker Dollar and higher equity prices. AUD/USD jumped towards 0.6900, testing June highs and posting the highest daily close since February. NZD/USD climbed to the highest level since early February, just below 0.6400.

USD/CAD closed at 1.3100, the lowest level since August 2022. On Friday, Canada will report May Manufacturing Sales. The Loonie lagged behind AUD and NZD despite the 2% gain in crude oil prices.


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