Original article credit: Adam Button, ForexLive via TradingView.
Title: USD Strengthens Across Major Currencies for the Week Ending July 18
The US dollar continued to show strength throughout the week of July 18, posting gains against most major currencies. This performance was underpinned by a combination of strong domestic economic data, hawkish commentary from Federal Reserve officials, and a general slowdown in momentum for other global currencies. Here’s a comprehensive breakdown of the key developments from this week in foreign exchange markets.
Overview of Weekly FX Market Moves
The dollar gained broadly against major currencies, demonstrating relative strength despite some pockets of weakness mid-week. Risk sentiment fluctuated as economic data showed resilience in the United States, contrasting with weakening indicators from other parts of the world such as the Eurozone and the UK.
Key market highlights included:
– A steady climb in US Treasury yields, supporting the dollar’s bid.
– Weakness in the euro and British pound amid softer-than-expected economic data.
– The Japanese yen continuing to struggle amid unrelenting yield differentials.
– Commodity currencies giving back gains as risk assets paused.
– Mixed performance in emerging market currencies.
Daily Recap: July 18 Session
On Thursday, July 18, the dollar extended its weekly gains with moderate strength. Although not trading aggressively higher, the greenback maintained its upper hand in major currency pairs. Risk assets moved sideways for much of the day, contributing to a consolidative tone in equities and FX alike.
Notable developments from the Thursday session:
– The EUR/USD pair traded broadly unchanged on the day, hovering just above the 1.1200 level.
– USD/JPY rose modestly, climbing toward the 157.20 zone as yen weakness remained pronounced across the board.
– GBP/USD nudged slightly lower on the day after disappointing UK retail sales data undermined the pound.
– AUD/USD gave up earlier intraday gains and drifted back toward 0.6720 levels.
Dissecting the Dollar’s Broad Strength
The US dollar has been well-supported by several key macroeconomic and geopolitical factors over the course of the week. Among the most impactful was the consistent strength in US consumer and labor-related data. Additionally, comments from key Federal Reserve officials suggested further persistence in the current interest rate regime.
Drivers behind the USD strength this week included:
1. Hawkish Fed Signals:
– Several Federal Reserve governors maintained a cautious tone about inflationary pressures.
– Policymakers underscored their readiness to keep rates elevated until clear signs of disinflation materialize.
– Market pricing continued to scale back the timing and extent of potential rate cuts.
2. Economic Resilience in the US:
– This week’s data showed ongoing strength in retail sales and jobless claims.
– Retail sales rose 0.2 percent in June, slightly below expectations but still indicative of healthy consumer spending.
– Weekly unemployment claims came in at 228,000, signaling sustained tightness in the labor market.
– Consumer confidence surveys remained upbeat, reinforcing the narrative of a robust domestic economy.
3. Weakness in Foreign Economies:
– In contrast to the upbeat US picture, economic data from the Eurozone, UK, and China pointed to stagnation or deceleration.
– The Eurozone’s CPI was flat on a month-over-month basis, underscoring ongoing disinflation trends.
– UK retail sales fell 0.5 percent for June, missing forecasts and weighing on GBP sentiment.
– Chinese GDP printed below expectations for Q2, adding a risk-off undertone globally.
Major Pair Performance Summary:
EUR/USD:
– The euro lacked clear direction for much of the week, pulled lower by regional economic softness and falling German yields.
– Despite some stabilization, the pair failed to retake the 1.1250 level and drifted lower by week’s end.
– ECB rhetoric remained muted, with President Christine Lagarde refraining from strong forward
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