The euro is trading with modest gains against the US dollar in early Asian hours, holding near 1.1685 as market participants remain on the sidelines ahead of fresh drivers for price action. At 11:00 (GMT+2), eurozone industrial production data for May will be released—forecasts call for a robust 2.9% annual gain after a prior -0.8% correction, and seasonally adjusted monthly growth of 0.9% from -2.4% previously. The ZEW Economic Sentiment Index is also expected to improve (to 37.8 from 35.3; Germany: 50.2 from 47.5), but most traders prefer to wait for clarity on US-EU trade terms.

President Donald Trump has delayed new "reciprocal" tariffs until August 1 and confirmed that notification letters have already been sent to EU authorities, outlining a potential 30% export tariff—with the possibility of adjustment in response to countermeasures.

GBP/USD: Sterling Under Pressure Despite Retail Sales Uptick

The British pound continues to weaken, posting fresh local lows since June 23 despite an annualized retail sales increase of 2.7%—well above both May’s 0.6% and consensus estimates. Investors are cautious ahead of today’s US CPI release at 14:30 (GMT+2), with expectations for a rise to 0.3% m/m and 2.6% y/y (core CPI to 2.9% y/y). Negative sentiment and persistently weak macro data have driven market odds for maintaining the current 4.25–4.50% Fed Funds Rate on July 30 up to 95.3%.

The UK’s own inflation report is due tomorrow at 08:00 (GMT+2), with annual CPI expected to remain at 3.5%. Any acceleration could dampen expectations for an August 7 rate cut from the Bank of England, though recent labor market weakness keeps that scenario likely (~85%).

AUD/USD: Aussie Corrects Lower as China Data Impresses

AUD/USD is drifting down near 0.6555, as investors digest a solid Q2 China GDP print (5.2% y/y, beating expectations) and a strong June industrial production reading (6.8% y/y). However, persistent focus on US inflation due at 14:30 (GMT+2) is dampening risk appetite. The RBA remains on hold, with US CPI data and Fed guidance seen as the primary short-term drivers for the pair.

Meanwhile, Australian PM Anthony Albanese’s official visit to China emphasized green steel initiatives and sought solutions for excess Chinese steel capacity. Australia remains China’s top iron ore supplier, and deeper cooperation could boost the national budget by A$105 billion this fiscal year.

USD/JPY: Dollar Advances, Markets Eye US Inflation

USD/JPY is extending gains toward 147.60 in early trading, with traders focused on US CPI and the ongoing expectation that the Fed will hold rates steady at 4.25–4.50%. Market sentiment is further shaped by weaker Japanese manufacturing data (industrial production down -0.1%, machinery orders -0.6%), although service sector activity modestly exceeded forecasts. Despite the lack of imminent policy changes, traders expect the Fed to begin easing as soon as September, with two or three 25 bp cuts likely by year-end.

US-Japan trade remains a wildcard, as rising American tariffs threaten to weigh on Japanese manufacturing in coming quarters.

XAU/USD: Gold Steady Near $3360 as Traders Await CPI

Gold remains steady around $3360 as the market braces for key US inflation data. Expectations for June CPI to accelerate from 2.4% to 2.7% y/y could underpin the US dollar, reducing the likelihood of near-term Fed rate cuts. The latest CFTC report shows a slight uptick in net speculative gold positions to 203,000 contracts, with long positions dominating across all contract categories. After strong US labor data, the odds of a July rate change have fallen below 5%, while expectations for a September move remain high.