Forex EUR/USD: Euro Recovers but Trade Tensions Remain

The euro is posting modest gains against the dollar, holding near its June 23 lows at 1.1617 during the Asian session. Focus is on German producer inflation, where the annual index fell to −1.3% (previous: −1.2%), and the monthly figure rebounded 0.1% (vs −0.2% in May), outpacing expectations for flat growth. Eurozone CPI was also revised up, now at 0.3% m/m and 2.0% y/y, while core inflation rose to 0.4%, stabilizing at 2.3%.

The stronger inflation picture lifts chances that the European Central Bank will cut rates by just 25 basis points at its September meeting. The decision comes amid escalating US-EU trade conflict: over the weekend, President Trump threatened 30% import tariffs, and luxury, chemical, and pharma sectors could face rates as high as 200% next year. For now, the EU is holding off on retaliation, hoping for a deal by the August 1 moratorium deadline.

At 14:30 (GMT+2), US housing permits and starts are due, with consensus forecasts for a minor drop to 1.39M permits but a rise to 1.30M in new construction. July’s Michigan consumer sentiment index could edge up to 61.5, supporting the dollar.

GBP/USD: Sterling Mixed on Jobs and Inflation Data

The pound is showing mixed movement near 1.3400, supported by strong UK jobs data: employment rose by 134K in May (vs 89K prior), and jobless claims fell to 25.9K, although expectations were for a steeper drop to 17.9K. However, unemployment ticked up to 4.7% and wage growth slowed.

Recent inflation figures showed core CPI at 3.7% (from 3.5%), complicating the Bank of England’s rate cut plans. Governor Andrew Bailey previously hinted the Bank may not wait for inflation to hit the 2% target, as the process is taking longer than anticipated. US retail sales data was also supportive for the dollar, with a 0.6% jump in June (previous: −0.9%), and the core gauge up 0.5%.

AUD/USD: Aussie Recovers After Labor Market Jolt

The Australian dollar is rebounding toward 0.6500 after sharp losses on labor market data. June employment rose just 2K (vs forecast 20K), and full-time jobs fell by 38.2K while part-time gained 40.2K; jobless rate hit 4.3%. The Reserve Bank of Australia kept rates on hold at 3.85%, prioritizing price stability and employment.

US dollar strength continues on solid retail sales: June’s 0.6% rise beat expectations, and annual growth accelerated to 3.9%. San Francisco Fed president Mary Daly boosted dovish sentiment, stating it is “reasonable” to expect two Fed rate cuts in 2025, with limited impact from White House tariffs.

USD/JPY: Dollar Steady as Japanese CPI Slows

The dollar is consolidating around 148.74, as Japan’s June national CPI slowed to 3.3% y/y (from 3.5%), while core CPI edged up to 3.4%. This mixed inflation backdrop complicates the Bank of Japan’s tightening plans. US housing and sentiment data are in focus today, as are inflation expectations from the University of Michigan, which could shape Fed policy outlook.

Investors now largely expect the Fed to keep rates at 4.25–4.50% despite political pressure, even as President Trump floated replacing Fed chair Jerome Powell. However, such a move remains unlikely in the near term.

XAU/USD: Gold Range-Bound, Awaits Fed Cues

Gold prices are trading flat, consolidating at Friday’s open as markets await new catalysts. Strong US inflation data earlier in the week lent support to the dollar, but producer price index numbers softened to 2.3% y/y, missing estimates.

The upcoming July 29–30 Fed meeting is expected to see no policy change, as inflation holds above 2% and the labor market remains robust. The financial world is also watching political maneuvering around the Fed, with speculation about Jerome Powell’s future adding uncertainty. Any abrupt leadership changes could spark volatility across asset classes.