Forex Majors Tread Cautiously Ahead of Central Bank Minutes
Later this morning, retail sales data is expected, with forecasts suggesting a 0.7% monthly decline and annual growth slowing from 2.3% to 1.2%, reflecting waning consumer confidence and spending—even as the ECB appears to have inflation under control. Nonetheless, government spending across the eurozone is rising, driven by import price shifts linked to White House tariff policies and substantial infrastructure and defense modernization programs. Last Friday, investors reviewed May’s producer price index data, which improved from –2.2% to –0.6% monthly and from 0.7% to 0.3% annually, underscoring ECB officials’ view that monetary policy remains effective. Belgian Central Bank head Pierre Wunsch noted that price growth is likely to decelerate further. The looming July 9 expiration of the U.S. tariff moratorium is putting additional pressure on the dollar, especially as no major deals with Japan, China, or the EU have been finalized, heightening tariff and global recession risks.
GBP/USD: Sterling is holding near last week’s closing levels as market activity remains subdued ahead of Wednesday’s release of Bank of England and Federal Reserve meeting minutes. Both central banks kept rates steady in June, but analysts expect the Fed to return to dovish guidance at its September meeting, while the BoE may move sooner. Traders will closely watch May GDP data—April showed a –0.3% contraction, and the most optimistic forecasts only see a return to zero growth. Industrial output also dropped by 0.3% year-on-year and 0.6% month-on-month. The pound is supported by relative clarity on U.S. tariff policy: a final deal with Washington means the UK will avoid steep tariff hikes after the July 9 expiration of the 90-day moratorium imposed by the White House.
AUD/USD: The Australian dollar remains under bearish pressure around 0.6510, continuing last week’s retreat from November highs as traders remain cautious ahead of new catalysts. The Reserve Bank of Australia announces its policy decision tomorrow morning, with forecasts divided: some expect a 25 basis-point rate cut (3.85% to 3.60%), while Bank of America analysts anticipate no change, citing persistent inflation at the upper end of the 2.0–3.0% target range. The RBA’s statement may provide guidance on future rate moves amid tariff and trade uncertainty. PM Anthony Albanese and Foreign Minister Penny Wong have openly criticized the U.S. administration’s tariff rhetoric, signaling ongoing trade friction, as highlighted during last week’s QUAD security talks in Washington.
USD/JPY: The U.S. dollar is regaining ground against the yen, hovering near 144.99 after a modest Friday correction that followed robust U.S. labor data. Nonfarm payrolls rose by 147K in June, easily surpassing the 110K consensus and the 12-month average of 146K; prior months’ figures were revised upward by a combined 16K. Unemployment fell to 4.1% (from 4.2%), and average hourly earnings slowed to 0.2% m/m from 0.4%. These figures reinforce market expectations that the Fed will keep rates steady in July. Fed Chair Jerome Powell has highlighted the need for granular analysis of the inflationary impact of tariffs before shifting to a decisively dovish stance. Meanwhile, Japan faces a record price hike in over 20,000 food items this year, as 195 major producers plan price increases—driven by raw material costs, high energy prices, and labor shortages.
XAU/USD: Gold prices are trending moderately lower, consolidating near $3,300/oz after last Friday’s modest rebound. The strong U.S. jobs report nearly wiped out expectations for a July Fed rate cut (FedWatch Tool: 4.7% probability), though a September –25bp adjustment remains on the table. Powell has signaled two or three such moves later in the year. Higher rates increase the opportunity cost of holding non-yielding gold, tempering bullish sentiment. As of last week, CFTC data show a slight reduction in net speculative long positions, though buying still dominates across contract categories. In June, U.S. employment rose by 147K, with strong gains in public sector and healthcare jobs (73K and 39K, respectively); unemployment fell to 4.1%, and wage growth slowed to 0.2% m/m and 3.7% y/y. Despite a modest pullback, the net long positioning remains bullish for gold.