The EURUSD is trading just below a recent high as the European Central Bank prepares to make an important policy announcement. The bank has lowered its financing rate from 4.5% to 2.15% over the last eight meetings. The GBPUSD has declined due to weak Service PMI data, though its Manufacturing PMI slightly exceeded expectations. The USDJPY is rising after a dip during the Asian session, supported by buyers at the 50% midpoint. **Recent Trade Developments** Recent trade developments include a deal between the U.S. and Japan, which shifts U.S. focus back to China and the EU. President Trump plans to impose tariffs between 15% and 50% on various countries unless they open their markets to U.S. businesses. Ongoing discussions continue with China and the EU regarding trade issues. The EU is negotiating with the U.S. and hopes to reach an agreement before August 1st without enacting countermeasures. Meanwhile, the Reserve Bank of Australia has kept its rate steady at 3.85%, even though a 25-basis point cut might be on the table. Board members want to see more evidence of decreased inflation, taking into account external risks from U.S. tariffs. The Governor of the Reserve Bank of Australia highlighted the need for additional data before making any future rate decisions, noting the current balance in the labor market despite recent inflation data. PMI data across Europe indicates mixed results. France and Germany had numbers close to forecasts, while the Eurozone as a whole exceeded expectations. In the UK, Manufacturing PMI surpassed forecasts, but Services PMI performed poorly. In Asia, Japan reported a stable service sector but a contracting manufacturing sector. Australia’s data shows improvements across all PMIs. In the financial markets, U.S. stocks are mixed: the Dow has fallen, but the NASDAQ and S&P are up. European indexes are also mixed, with Spain’s Ibex showing notable gains while Italy’s FTSE MIB has dropped. U.S. Treasury yields are rising across all maturities. In commodities, crude oil prices are up, gold is declining, and Bitcoin remains stable. **Market Outlook** With the European Central Bank likely to keep rates steady, we believe the recent strength of the EURUSD is fragile and could present a selling opportunity. The mixed PMI data, particularly weak German manufacturing, does not support a strong continued rally. We should prepare for volatility and consider bearish positions if the ECB’s guidance leans toward being dovish. The former president’s focus on tariffs is likely to keep the U.S. dollar strong as a safe haven amid global trade uncertainties. Recent reports confirm that U.S. officials are reviewing tariffs on over $300 billion worth of Chinese goods, heightening risk aversion. This situation favors holding long dollar positions against currencies with more economic challenges. The British pound appears vulnerable following a disappointing Services PMI report, crucial for the UK economy. This weakness is reinforced by the latest statistics from the Office for National Statistics, which show an unexpected 0.5% drop in monthly retail sales. Therefore, we should look for chances to short the GBPUSD pair or buy put options. The Reserve Bank of Australia’s decision to maintain its cash rate, supported by Ms. Bullock’s cautious remarks, makes the Australian dollar look strong. Australia’s recent quarterly inflation rate stood at 3.8%, far exceeding the central bank’s target. This justifies a hawkish stance and reflects strong local PMIs, making the AUD a favorable currency compared to those with weakening fundamentals like the pound. With Japan’s manufacturing sector slipping back into contraction, we expect the yen to be under pressure against the dollar. The USDJPY pair recently bounced back from a key technical level, indicating that buyers are defending dips and supporting upward movement. We see this as a good time to pursue strategies that benefit from a rising exchange rate. Higher U.S. Treasury yields are making the dollar more attractive while putting pressure on non-yielding assets. The sharp decline in gold prices reflects this trend, as a stronger dollar and rising interest rates increase the cost of holding gold. We anticipate that this environment will remain challenging for precious metal bulls in the upcoming weeks. Create your live VT Markets account and start trading now.

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