Forex Today: Risk mood improves ahead of US consumer sentiment data

Eren Sengezer FXStreet

Here is what you need to know on Tuesday, July 25:

Risk flows dominated the financial markets during the Asian trading on hopes of Chinese economy picking up steam on additional stimulus measures. Investors seem to have turned slightly cautious in the European morning, with US stock index futures trading mixed. In the second half of the day, Conference Board's Consumer Confidence Index data will be featured in the US economic docket alongside May Housing Price Index.

Chinese news agency Xinhua reported earlier in the day that the Politburo - the top decision-making body of the ruling Communist Party - announced that they will step up economic policy adjustments, focusing on expanding domestic demand, boosting confidence. The Shanghai Composite Index gained more than 2% on Tuesday and Hong Kong's Hang Seng Index rose nearly 4%.

The US Dollar Index (DXY) closed the fifth straight day in positive territory on Monday. In the European session, the DXY stays in a consolidation phase below 101.50. The benchmark 10-year US Treasury bond yield continues to edge higher toward 3.9% ahead of the Federal Reserve's critical monetary policy announcements on Wednesday.

Earlier in the day, the data from Germany revealed that the headline IFO Business Climate Index declined to 87.3 in July from 88.6 in June. This reading came in weaker than the market expectation of 88.0. The IFO Expectations Index – indicating firms’ projections for the next six months, fell to 83.5 in July from the previous month’s 83.8 reading. Following a recovery attempt toward 1.1100, EUR/USD lost its traction and declined to the 1.1050 area.

The upbeat market mood in the Asian session provided a boost to AUD/USD. The pair was last seen rising 0.5% on a daily basis slightly above 0.6770.

GBP/USD dropped below 1.2800 for the first time in two weeks on Monday. Early Tuesday, the pair stages a technical correction and trades in positive territory above 1.2850.

USD/JPY snapped a four-day winning streak and closed in the red on Monday. The pair continues to inch lower toward 141.00 in the European session. In a recently published report, the Japanese government said that inflation is seen staying around 0.7% in the longer term. “Wages are projected to increase by 2.5% in FY24, following a 2.6% jump in FY23,” the statement further read.

Pressured by rising US Treasury bond yields, gold price closed below $1,960 on Monday. XAU/USD clings to modest daily gains early Tuesday and trades at around $1,960.

Bitcoin broke below its 10-day-old trading range and touched its lowest level in a month at $28,850 on Monday. BTC/USD struggles to stage a rebound and trades slightly above $29,000. Ethereum lost 2% on the first trading day of the week before going into a consolidation phase at around $1,850.

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.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.