Forex Today: Fed-inspired dollar weakness continues ahead of key data releases

Eren Sengezer FXStreet

Here is what you need to know on Thursday, July 28:

The dollar came under heavy selling pressure late Wednesday and the US Dollar Index (DXY) erased all of Tuesday's gains. The DXY stays on the back foot and trades below 106.50 early Thursday as investors reassess the Federal Reserve's policy outlook. Later in the session, the US Bureau of Economic Analysis will release its first estimate of the second quarter of Gross Domestic Product (GDP) growth. The US Department of Labor's weekly Initial Jobless Claims will also be looked upon for fresh impetus. The European docket will feature German inflation figures and the business sentiment data for the eurozone.

The Fed announced on Wednesday that it hiked the policy rate by 75 basis points to the range of 2.25-2.5%. During the press conference, Chairman Jerome Powell said that they will not be providing any rate guidance from now on. Regarding the policy outlook "our thinking is that we want to get to a moderately restrictive level by end of this year," Powell noted. "That means 3% to 3.5%."

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The Nasdaq Composite Index gained more than 4% on Wednesday and the S&P 500 Index gained 2.6%. Nevertheless, US stock index futures are trading in negative territory in the European morning, suggesting that investors are turning cautious ahead of the US GDP data.

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EUR/USD climbed to a daily high of 1.0235 in the early European session on Thursday. With the negative shift witnessed in risk sentiment helping the dollar limit its losses, however, the pair retreated below 1.0200.

GBP/USD climbed to its highest level in four weeks at 1.2188 but went into a consolidation phase early Thursday. The pair trades in a relatively tight channel above 1.2170 in the European morning.

Gold capitalized on falling yields on Wednesday and advanced to a fresh two-week high above $1,740. The benchmark 10-year US Treasury bond yield is up 1% so far on Thursday, not allowing XAU/USD to gather further bullish momentum.

USD/JPY closed in negative territory on Wednesday and continues to push lower toward 135.50 on Thursday. On Friday, Tokyo CPI, Industrial Production and Unemployment data from Japan will be watched closely by market participants.

Bitcoin gained 8% on Wednesday but lost its momentum near $23,000. Ethereum touched its highest level since June 10 at $1,676 earlier in the day before retreating toward $1,600.

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.

EUR/USD weakens to four-week lows near 1.1750

EUR/USD’s selling pressure is gathering pace now, approaching the area of multi-week troughs in the mid-1.1700s on Thursday. The pair’s intense decline comes on the back of another day of solid gains in the US Dollar, particulalry exacerbated following firm prints from the weekly US labour market.

GBP/USD drops further, hovers around 1.3460

In line with the rest of its risk-linked peers, GBP/USD faces increasing selling pressure and recedes toward the 1.3460 region, or four-week lows, on Thursday. Cable’s persistent pullback comes in response to the continuation of the recovery in the Greenback amid a solid US data and a divided FOMC when it comes to the Fed’s rate path.

Gold clings to daily gains near $5,000

Gold struggles for direction and clings to its daily gains around the key $5,000 mark per troy ounce on Thursday. The precious metal sticks to the bid bias amid reignited geopolitical tensions in the Middle East and despite marked gains in the US Dollar and rising US Treasury yields across the curve.

Ripple slips toward $1.40 despite SG-FORGE tapping protocol for EUR CoinVertible

XRP extends its decline, nearing $1.40 support, as risk appetite fades in the broader market. SG-FORGE’s EUR CoinVertible launches on the XRP Ledger, leveraging the blockchain’s scalability, speed, security, and decentralization.

Hawkish Fed minutes and a market finding its footing

It was green across the board for US Stock market indexes at the close on Wednesday, with most S&P 500 names ending higher, adding 38 points (0.6%) to 6,881 overall. At the GICS sector level, energy led gains, followed by technology and consumer discretionary, while utilities and real estate posted the largest losses.

Injective token surges over 13% following the approval of the mainnet upgrade proposal

Injective price rallies over 13% on Thursday after the network confirmed the approval of its IIP-619 proposal. The green light for the mainnet upgrade has boosted traders’ sentiment, as the upgrade aims to scale Injective’s real-time Ethereum Virtual Machine architecture and enhance its capabilities to support next-generation payments.