Market sentiment stayed slightly positive early Friday, supported by expectations that the White House will extend the pause on tariffs against China and increasing speculation that most United States (U.S.) trade deals are already finalized. Adding to the improved risk mood were dovish signals from the Federal Reserve (Fed), prompted by disappointing U.S. economic data and the likely appointment of dovish candidates to key Fed positions.
Hopes for a peace deal between Russia and Ukraine also contributed to the positive tone. Additionally, strong performance by U.S. technology companies, despite a broader market pullback, and a largely upbeat U.S. corporate earnings season further dampened risk-off sentiment.
On Thursday, U.S. Commerce Secretary Wilbur Lutnick mentioned the possibility of extending the China tariff deadline by 90 days beyond the original August 12 expiration. Similarly, U.S. Treasury Secretary Scott Bessent stated that trade negotiations were mostly complete. Meanwhile, U.S. President Donald Trump announced plans to meet Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy next week, raising hopes for a resolution to the prolonged and deadly conflict. However, the White House denied Kremlin claims that the Trump–Putin meeting was confirmed or a location secured. U.S. officials clarified that any such summit would depend on Putin first holding talks with Zelenskyy.
In the Middle East, an Axios report revealed that an Israeli official confirmed the Israeli security cabinet had approved Prime Minister Benjamin Netanyahu’s proposal to occupy Gaza City. Satellite imagery further indicated that Israel is massing troops and military equipment near Gaza, increasing the likelihood of a renewed ground invasion.
In terms of U.S. economic data, Initial Jobless Claims for the week ending August 2 rose slightly to 226,000 from 218,000, compared to market expectations of 221,000. Preliminary second-quarter (Q2) Nonfarm Productivity came in at 2.4 percent, slightly below the expected 2.5 percent but improving from the revised prior reading of -1.8 percent. Q2 Unit Labor Costs rose to 1.6 percent, exceeding the 1.5 percent forecast but well below the revised previous figure of 6.9 percent. Wholesale Inventories for June matched market expectations at 0.1 percent.
The New York Federal Reserve’s one-year inflation expectations for July increased slightly to 3.1 percent from 3.0 percent in June. Meanwhile, Atlanta Fed President Raphael Bostic sounded slightly hawkish, stating that the key issue for the Fed is whether the price increases caused by tariffs are temporary or more persistent. Reports also suggest that Fed Governor Christopher J. Waller, known for his dovish stance, is the Trump administration’s preferred candidate to replace Jerome Powell as Fed Chair in 2026. Additionally, Council of Economic Advisers (CEA) Chair Stephen Miran will temporarily fill the position vacated by Fed Governor Adriana Kugler.
Elsewhere, the Bank of England (BoE) cut interest rates by 0.25 percent in line with market expectations. However, the narrow 5-4 vote split among policymakers suggests limited consensus for future rate cuts, which lent some support to the British Pound against the U.S. Dollar.
In commodity markets, gold came under pressure after U.S. news that gold bars weighing one kilogram and 100 ounces may soon be classified under customs codes subject to new levies. Crude oil prices also weakened after S&P Global Commodity Insights warned that higher tariffs are likely to sharply reduce global oil demand in 2025.
In Japan, the Bank of Japan’s (BoJ) Summary of Opinions from its July meeting revealed division among policymakers over the timing of future interest rate hikes. This, along with softer household spending, weighed on the Japanese Yen. However, stronger trade balance data and a solid Eco Watchers survey helped limit losses for the currency.
Overall, the U.S. Dollar Index (DXY) remained under pressure. Equity markets closed mixed, with the Nasdaq Composite maintaining gains while the Dow Jones Industrial Average and S&P 500 Index retreated. Cryptocurrencies moved higher, supported by the weaker U.S. Dollar and news that President Trump signed an executive order allowing retirement accounts to include cryptocurrency as an investment option. In the currency market, the Australian Dollar to U.S. Dollar (AUDUSD) and New Zealand Dollar to U.S. Dollar (NZDUSD) pairs edged higher. However, the U.S. Dollar to Canadian Dollar (USDCAD) pair remained directionless ahead of Canada’s upcoming employment report and amid ongoing uncertainty surrounding the U.S.–Canada trade deal.
EURUSD extended gains for three straight days before turning cautious near the weekly high early Friday. The pause reflects market indecision, though a weaker U.S. Dollar, dovish Federal Reserve outlook, and a halt in dovish comments from European Central Bank (ECB) officials—alongside rising odds of a U.S.–European Union trade deal lowering tariffs from 30% to 15%—are supporting the bulls.
GBPUSD swings around a two-week high after a five-day winning streak in quiet markets. The pair posted its biggest daily gain in two months on Thursday, despite the Bank of England's (BoE) expected 0.25% rate cut. This rally was fueled by the close 5–4 vote and hawkish remarks from BoE Governor Andrew Bailey, hinting at a pause in further rate cuts.
USDJPY, meanwhile, ended a two-day losing streak but remains within its weekly range. The rebound followed the Bank of Japan’s (BoJ) July meeting Summary of Opinions, showing division among policymakers on future hikes. Mixed Japanese data and talk of possible new U.S. tariffs on Japan—if Tokyo supports Russian oil purchases—also influenced the move. Still, the Japanese Yen’s safe-haven appeal and mixed bond yields kept USD/JPY's upside in check.
A broadly weaker U.S. Dollar, hopes of more stimulus from China, and speculation about delaying new U.S. tariffs on China supported the Australian, New Zealand, and Canadian Dollars, despite weak domestic data and risk factors. AUDUSD extended its four-day winning streak, while NZDUSD rose for a third straight day to hit the weekly high. USDCAD stayed under pressure, reversing Thursday’s rebound from a two-week low. The Canadian Dollar found support from progress in U.S.–Canada trade talks—despite no breakthroughs—and from the softer U.S. Dollar, even as falling crude oil prices, due to tariff-driven demand concerns, weighed on the Loonie. Additionally, positioning ahead of Canada’s jobs report also kept USDCAD under bearish pressure.
Gold stays strong at a two-week high, on track for its second consecutive weekly gain, driven by concerns over tariffs, political risks, and new U.S. tariffs on gold bars. The precious metal’s safe-haven status and a weaker U.S. Dollar support XAU/USD buyers, bringing them closer to a record high. A Reuters report, citing the Financial Times, revealed that the U.S. has imposed tariffs on one-kilogram and 100-ounce gold bars, which could impact Switzerland, the world’s largest gold refining hub. This move may tighten supply and negatively affect London trading, while boosting U.S. COMEX activity.
Crude oil continues to struggle, hitting a two-month low after falling for six consecutive days, despite rising geopolitical tensions over Russia and Gaza. The focus remains on OPEC+'s decision to increase output and a report from S&P Commodity Insights warning that higher tariffs could sharply reduce global oil demand in 2025. Additionally, President Trump's push for more oil drilling and lower energy prices adds pressure to the market.
Meanwhile, cryptocurrencies had a strong day on Thursday after Trump signed an executive order allowing private equity, real estate, and crypto investments in 401(k) accounts, opening up access to roughly $12.5 trillion in retirement funds. Risk assets also got a boost from a return of Bitcoin spot ETF inflows, following four days of outflows. Despite Bitcoin retreating from a weekly high, Ethereum reached a yearly peak, continuing its three-day winning streak before pulling back slightly while holding onto modest gains.
The economic calendar will feature the U.S. University of Michigan Consumer Inflation Expectations, Canada’s monthly employment report, and China’s inflation data on Saturday, along with speeches from mid-tier central bankers. However, the focus will be on key political and trade developments. This includes discussions on Fed leadership, a U.S.–Russia–Ukraine summit, and Israel’s Gaza offensive. Any unexpected tariffs from Trump could also shake market sentiment.
This could keep pressure on the U.S. Dollar and help gold push past the $3,445 hurdle toward a new record high near $3,500. Crude oil may stay under pressure, while cryptocurrencies could see modest gains. The Australian and New Zealand Dollars may trim some gains if risk appetite weakens, and equities could experience mild losses amid market uncertainties. Major currencies may benefit from the U.S. Dollar's weakness, except for the Japanese Yen, due to uncertainty around the Bank of Japan’s next move.
Friday promises to be eventful, despite a light economic calendar, so traders should remain cautious.
May the trading luck be with you!
