Forex Today: Recession fears keep leading the way

Valeria Bednarik FXStreet

What you need to take care of on Thursday, July 7:

The dollar remained strong on Wednesday, with EUR/USD reaching a fresh 20-year low of 1.0160. The shared currency is among the weakest amid fears of a local recession and the looming energy crisis.

GBP/USD trades around 1.1930, under pressure as the UK Government crisis deepened. Over 30 officials resigned, while many others asked Prime Minister Boris Johnson to leave. The 1922 Committee of backbench Tory MPs is looking to change rules protecting PM Johnson from a second no-confidence vote.

The FOMC released the Minutes of its latest meeting. The document showed that Federal Reserve officials agreed high inflation warranted restrictive interest rates and are open to being even more restrictive if inflation persists. Also, the majority of participants saw a downside risk to growth, while judging there was a “significant risk” higher inflation could become entrenched. Somehow, the US Federal Reserve left the doors open for another 75 bps hike.

Wall Street spent the day struggling to post gains, but major indexes closed the day up. Despite hawkish FOMC Minutes, policymakers refrained from mentioning a 100 bps rate hike, despite pledging to do whatever was needed to tame inflation. Policymakers also refrained from speaking about recession.

The US Treasury yield curve remains inverted. The 10-year note currently yields 2.93%, while the 2-year note currently yields 2.97%. An inverted curve is usually seen as an early sign of recession.

Commodity-linked currencies were little changed against the greenback. AUD/USD trades around 0.6780 while USD/CAD hovers around 1.3040.

The USD/CHF reached a fresh monthly high of 0.9743, while the USD/JPY pair settled at 135.85.

Gold fell to a fresh 2022 low of $1,732.19 a troy ounce, trading nearby at the end of the day. Crude oil prices edged lower, with the barrel of WTI now at $98.40.

Like this article? Help us with some feedback by answering this survey:

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

AUD/USD eyes 100-SMA hurdle near 0.7035 as hawkish RBA counters firmer USD

AUD/USD regains positive traction on Tuesday and climbs to 0.7030 during the Asian session, reversing the previous day's corrective slide from a one-month high as hawkish RBA rate expectations continue to support the Aussie. Spot prices, however, remain below the 100-day SMA pivotal resistance amid a firmer US Dollar as traders brace for Australia’s September CPI report on Wednesday ahead of the Fed rate decision.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold advances modestly past $4,000

Gold looks to consolidate Tuesday’s humble gains just above the key $4,000 mark per troy ounce. Indeed, the precious metal adds to Monday’s bounce despite the better tone in the US Dollar, mixed US Treasury yields and steady caution ahead of the FOMC event on Wednesday.

Crypto Today: Bitcoin, Ethereum and XRP on edge as sell-side pressure intensifies

Cryptocurrency prices are broadly correcting on Tuesday, led by Bitcoin (BTC) edging lower below the pivotal $80,000 level. Ethereum (ETH) mirrors Bitcoin’s neutral-to-bearish outlook, while Ripple (XRP) hovers around $1.30.

Experts agree: Fed policy outlook and geopolitical tensions keep US Dollar bid

The US Dollar Index rallies 0.6% in three days and hits fresh two-week highs above 102.00. Investors return to the US Dollar as markets brace for a hawkish hold by the Fed on Wednesday. Waning hopes of any immediate US-Iran peace deal have provided additional support to the safe-haven USD.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.