Summary
- Thursday’s market roundup shows cautious optimism as upbeat Fed inflation data and softer U.S. jobless claims offset Trump’s criticism of Powell.
- FOMC’s hawkish halt, strong Q2 U.S. GDP, and Trump Administration’s deal-making skills boost the U.S. Dollar.
- White House’s “Crypto Policy Report” falls short of expectations by overlooking Bitcoin and Ethereum.
Mixed Macro Economic Data
The risk complex remains mildly positive as Thursday’s New York session begins. Market players mainly cheer the not-so-hot U.S. inflation signal and a slight pullback in the Weekly Jobless Claims. In doing so, the traders paid little heed to U.S. President Donald Trump’s sustained criticism of the Federal Reserve (Fed) Chairman Jerome Powell, especially after the U.S. central bank left the benchmark policy rate unchanged the previous day.
On a different page, the U.S policymakers praise their success in securing trade deals with major economies and defending Trump’s tough stance, despite fears of a broader political divide. In contrast, July’s activity data from China showed challenges for the world’s second-biggest economy, whereas the Bank of Japan (BoJ) marked a positive attitude despite keeping the current monetary policy unchanged. Meanwhile, European officials continue expressing their dissatisfaction with the trade deal with the U.S.
Elsewhere, Meta and Microsoft surpassed market expectations, supporting the technology stocks and helping the Nasdaq. However, the firmer U.S. Treasury bond yields and the Fed’s hawkish halt stopped S&P 500 and Dow Jones from closing on the positive side. That said, Thursday’s initial performance of Wall Street appears positive.
Cryptocurrencies also remain subdued despite the broadly upbeat economic signals and the White House’s policy report urging government and regulators to adhere to crypto-friendly measures. The reason could be linked to an absence of mentions surrounding Bitcoin reserve plan, but a rather bold attempt to highlight Ripple (XRP), Cardano (ADA) and Solana (SOL).
Against this backdrop, the U.S. Dollar Index braces for the biggest weekly gain since September 2022 despite recently hovering around the two-month-high.
Additionally, the U.S. Treasury bond yields pare the previous day’s gains, while WTI crude oil snaps a three-day winning streak to retreat from a five-week high at $69.85.
What Does PCE Data Signals
The U.S.Core Personal Consumption Expenditures (PCE) Price Index for July, popularly known as the Federal Reserve’s preferred inflation gauge, came in at 2.8% year-over-year (YoY), slightly above the 2.7% market consensus.
Further, weekly Initial Jobless Claims reprinted 218K figures compared to 217K prior, but below the forecast of 224K. Moreover, the second-quarter (Q2) Employment Cost Index matched expectations at 0.9%, up from 0.8%, but the wage details were more positive.
These mostly upbeat data support the Fed’s latest decision to hold rates steady and reject outright bearish bias but provide little clarity on future policy, leading to a pause in U.S. Dollar bulls after the release.
Elsewhere, U.S. President Donald Trump continues criticising Fed Chair Jerome Powell as he (logically) turns down the push towards a rate cut. Trump’s latest comments on Truth Social include, “Jerome ‘Too Late’ Powell has done it again!!! He is TOO LATE, and actually, TOO ANGRY, TOO STUPID, & TOO POLITICAL, to have the job of Fed Chair.”
Meanwhile, Trump’s readiness to punish nations dealing with Russia via higher tariffs, in an attempt to push Moscow towards finalizing a peace deal with Ukraine in 10 days, challenges the market’s optimism. On the same line could be the Republican leader’s dislike for nuclear practices in Iran and North Korea.
Having witnessed a mixed Wednesday on Wall Street, the U.S. equity benchmarks begin Thursday’s trading on a front foot with all three indices, namely the S&P, Nasdaq, and Dow Jones, posting gains by the press time.
The U.S. equity trader’s optimism takes clues from the after-market results of Meta and Microsoft, as well as recently upbeat U.S. data stream, and the Fed’s status quo.
Meanwhile, Bitcoin (BTC/USD) retraces from the day’s high other top-tier cryptocurrency pairs post mixed performances, even as traders reassess the White House “Crypto Policy Report” and consider it market-friendly.
Further, the cautious optimism also helps Gold, especially when the U.S. Treasury bond yields retreat after a stellar jump, as the bullion bounces off a four-week low to pare the weekly loss.
- Gold trades near a four-week low, up 0.59% intraday to $3,330 by the press time.
- Bitcoin (BTC/USD) stalls three-day losing streak, but lacks upside momentum near $118K by the press time.
- Ethereum (ETH/USD) takes offers to reverse Wednesday’s rebound from a weekly low, down 0.80% intraday near $3,780 at the latest.
- U.S. Dollar Index (DXY) seesaws at two-month high, extends five-day winning streak of late.
- Wall Street Jumps: Having witnessed mixed closing the previous day, Wall Street benchmarks print gains during the initial hours, even if stocks in Asia and Europe drifted lower.
- WTI Crude Oil retreats from its five-week high, down 1.0% intraday to $69.55 as we write.
Apple, Amazon and Risk Catalysts Eyed…
As “Turnaround Thursday” begins to take shape across risk assets and the U.S. economic calendar lightens for the rest of the day, market focus shifts to qualitative drivers for direction.
As a result, developments surrounding Trump’s trade strategies and political stance on Russia, the Middle East, and North Korea could stir geopolitical sentiment. Also, important to watch will be the after-hours second-quarter (Q2) earnings from Apple and Amazon, which could influence tech sentiment and broader market tone on Wall Street.
Given the current twist in the market, the U.S. Dollar could stall its weekly rally and allow Bitcoin (BTC/USD) and Gold to build on their latest recoveries. However, traders may remain cautious before Friday’s U.S. employment report for July, featuring the headline Nonfarm Payrolls (NFP), which could reset expectations for the Federal Reserve’s next move.
Also read: Market Digest: Bitcoin Rebounds to 118K as Dollar Pauses Post-Fed Rally
