The risk complex remains dicey, slightly downbeat, on Friday as easing fears of politically influenced leadership change at the U.S. Federal Reserve (Fed) joins mixed headlines surrounding the U.S. trade relations and political stance. Also testing the waters are heavy liquidations of long positions in the cryptocurrency market, which previously cheered “crypto week” gains.
On Thursday, U.S. President Donald Trump visited the Fed’s construction side and met Chairman Jerome Powell. The Republican Leader rejected chatter of him plotting to fire Powell by saying, “it’s not necessary”, and adding that there was “no tension” as he spoke with Powell about interest rates. This could be cited as the key catalyst behind Thursday’s U.S. Dollar recovery, which in turn weighed on other risk assets, including gold and cryptocurrencies.
Meanwhile, ex-Fed official Kevin Warsh mentioned his inclination to cut the rates if he were still at the Fed. Additionally, chatter also grew that a fund manager linked to Trump sued the Fed over secrecy, indirectly serving a political witch-hunt of the U.S. central bank decision-makers.
Elsewhere, the Wall Street Journal (WSJ) conveyed Trump’s positive shift toward a trade deal with China ahead of next week’s talks and favored cautious optimism along with recent upbeat headlines suggesting progress on the U.S.-Australia trade deal negotiations. On the same line were comments from US Treasury Secretary Bassent and US Commerce Secretary Lutnick stating, “U.S. in pretty good place with China on trade”, and the EU wants to make a deal (with the U.S.), respectively. However, the Financial Times (FT) reports the EU’s on-hand plan to retaliate against U.S. tariffs if needed, which in turn tests the trade-linked positive vibes.
Geopolitical tensions escalated between Thailand and Cambodia early Friday and pushed the United Nations Security Council to call an emergency meeting. Further, the Pentagon’s latest approval to sell weapons to Egypt and Trump’s readiness to help Ukraine via arms delivery raised fears of prolonged wars in troubled nations, especially amid Trump’s open criticism of Russia and Iran.
On the economic calendar, the latest U.S. Durable Goods Orders flashed mixed results for June as the headline figures marked a negative outcome, but the Core details were slightly positive, which in turn allowed the U.S. Dollar to defend Thursday’s gains. On Thursday, the S&P Global Flash prints of the July Purchasing Managers Index (PMIs) marked downbeat figures for Germany and the UK, along with mixed EU and U.S. outcomes. Further, the US housing inventories flashed recession warnings with a jump, while Jobless Claims eased.
The European Central Bank (ECB) held its benchmark policy rate unchanged, as expected, while the ECB President, Christine Lagarde, appeared economically optimistic despite looming challenges for inflation due to the trade war and political fears. Following the ECB meeting, market players expect no rate cut for September. However, that couldn’t lift the EURUSD amid a broad-based recovery in the U.S. Dollar.
Wall Street closed mixed as Intel’s Q2 EPS missed the mark and the tech giant warned about exiting advanced chip manufacturing within four years if it fails to secure major foundry clients.
In the crypto universe, major players kept showing preference for Bitcoin (BTC/USD) and Ethereum (ETH/USD), but the position liquidation and Exchange Traded Fund (ETF) data suggested otherwise. That said, out of Bitcoin’s total liquidations of $458.75 million since July 20, the long liquidations mark 66% share with $304.77 million, while the short liquidations were $153.98 million. Elsewhere, U.S. BTC Spot ETF braces for the first weekly negative net inflow in seven weeks, with the current figure of -$58.64 million. Apart from these catalysts, a firmer U.S. Dollar and fears ahead of July 30’s White House Crypto Report might have also weighed on the Bitcoin (BTC/USD) price.
Amid these plays, the U.S. Dollar Index (DXY) recovered from the lowest level in over two weeks to snap a four-day losing streak, edging higher by the press time. The same exerted downside pressure on the EURUSD and other major currencies, not to forget Gold and Bitcoin.
The precious metal (Gold) is currently printing a three-day losing streak, paring the weekly gains, despite its traditional heavenly status, whereas BTC/USD also drops for the third consecutive day despite bouncing off a fortnight low by the press time.
The U.S. and Japan bond yields snap a two-day winning streak and portray the market’s cautious mood, whereas WTI crude oil ignores a firmer U.S. Dollar to extend Thursday’s rebound.
Also read: Market Digest: Bitcoin Slips to $115K amid Mixed Market Sentiment and Profit Booking.
Latest moves of key assets
- Gold drops for the third consecutive day, reaching a weekly low around $3,338, down 0.90% intraday as we write.
- Bitcoin (BTC/USD) also prints a three-day losing streak, with a 1.80% intraday loss near $116,200 by the press time.
- Ethereum (ETH/USD) keeps bouncing off the weekly low near $3,730, up 0.55% intraday.
- U.S. Dollar Index (DXY) extends recovery from a two-week low to 97.85 at the latest.
- Wall Street closed mixed: Nasdaq and S&P 500 hovered around record highs with mild daily gains, while Dow Jones dropped 0.70%. That said, U.S. stock futures and global stocks have edged lower of late.
- WTI Crude gains 0.40% intraday to hold Thursday’s rebound near $66.40, still facing a two-week downtrend.
Looking Forward..
With most economic data scheduled for Friday already out, traders will focus on chatter about Fed leadership and preparations for next week’s monetary policy meeting of the Federal Open Market Committee (FOMC), which in turn can allow the U.S. Dollar to defend recent gains and weigh on Gold and Bitcoin. Also important to watch will be the updates about the U.S. trade deals with major economies and Trump’s geopolitical actions.
Should talks of more rate cuts gain traction, backed by Trump’s U-turn on firing Powell or retreat from his trade deal optimism with China, the EU, and others, the U.S. Dollar could pull back from its recent gains.
Also, Trump’s threats to Russia and Iran might reignite geopolitical tensions, and if Wall Street turns positive amid preparations for next week’s FOMC and Apple earnings, the USD could reverse its gains. This might favor Gold to defend the key $3,340 support, halting its recent decline, while offering some relief to Bitcoin.
