Market Update for July 24th
Here’s a quick look at today’s developments in the financial markets. On Thursday, July 24th, the focus has shifted from trade headlines to the European Central Bank’s upcoming monetary policy announcement. The Economic Calendar will also reveal July’s manufacturing and service purchasing manager index (PMI) data from Germany, the Eurozone, the UK, and the US.
This Week’s US Dollar Price
This week, the US dollar (USD) is notably weaker compared to several other currencies, particularly the Australian dollar. Below is a summary of the rate changes:
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.19% | -1.13% | -1.27% | -0.83% | -1.54% | -1.35% | -1.10% | |
| EUR | 1.19% | 0.14% | -0.05% | 0.34% | -0.40% | -0.35% | 0.05% | |
| GBP | 1.13% | -0.14% | -0.40% | 0.25% | -0.50% | -0.26% | 0.11% | |
| JPY | 1.27% | 0.05% | 0.40% | 0.46% | -0.23% | -0.13% | 0.35% | |
| CAD | 0.83% | -0.34% | -0.25% | -0.46% | -0.65% | -0.52% | -0.31% | |
| AUD | 1.54% | 0.40% | 0.50% | 0.23% | 0.65% | 0.13% | 0.59% | |
| NZD | 1.35% | 0.35% | 0.26% | 0.13% | 0.52% | -0.13% | 0.38% | |
| CHF | 1.10% | -0.05% | -0.11% | -0.35% | 0.31% | -0.59% | -0.38% |
The above table outlines how the US dollar compares to other major currencies this week. For instance, the changes can indicate fluctuations that impact various markets. It’s a lot to take in, maybe. But staying informed is key.
Wednesday’s market actions were heavily influenced by news about US trade contracts, which led to some enthusiasm. Interestingly, the US Dollar index has dipped into negative territory for four consecutive days. As for the US equity index futures, they showed mixed results earlier on Thursday, but the USD index remained stable above 97.00. By the way, the White House announced that President Trump will visit the Federal Reserve today.
During the Asian trading hours, Australian data revealed that S&P Global Composite PMI increased to 53.6 in July, up from 51.6 in June. This suggests that private sector activities are expanding, possibly at a quicker pace. RBA Governor Michelle Bullock has repeatedly stated that a gradual, measured approach to easing is fitting. Following a significant rise of over 0.7% on Wednesday, the AUD/USD has been maintaining its upward trend, trading above 0.6600, a level not seen since November.
On a different note, Japan’s Jibun Bank Manufacturing PMI slipped to 48.8 in July, underperforming against expectations of 50.2. However, there was positive news as the Jibun Bank Services PMI rose significantly from 51.7 to 53.5 during this time. The USD/JPY pair is experiencing bearish pressure, hovering close to 146.00, down more than 0.3% today.
The ECB is anticipated to keep interest rates unchanged after its July meeting. President Christine Lagarde is scheduled to speak about the policy outlook in a press conference set for 12:45 GMT. Meanwhile, the EUR/USD remains in a consolidation phase above 1.1750 after some moderate gains on Wednesday.
The GBP/USD has stabilized above 1.3550, following a strong closure over the last three days. Additionally, the USD/CAD is fluctuating around 1.3600 during the European session, down about 1% for the week. Later today, Statistics Canada will release its May retail sales figures.
When it comes to gold, the market’s risk dynamics have made it difficult for the precious metal to find demand, leading to a significant dip on Wednesday. Gold (XAU/USD) continues to slide, now priced below $3,380 after losing over 1% yesterday.
Understand the ECB
The European Central Bank (ECB), based in Frankfurt, Germany, is the primary bank for the eurozone, responsible for setting interest rates and managing monetary policy to maintain price stability, ideally around 2% inflation. The bank’s main tool for achieving this is through adjusting interest rates. Generally, higher interest rates lead to a stronger euro, and vice versa. Monetary policy decisions are made by the Management Council during their eight annual meetings.
In extreme situations, the ECB can implement quantitative easing (QE), which involves creating more euros to buy assets like government bonds. This usually results in a weaker euro. QE is generally considered a last resort when lowering interest rates isn’t sufficient to stabilize prices, as seen during the 2009-11 financial crisis and the COVID-19 pandemic.
On the other hand, quantitative tightening (QT) is the converse of QE. It occurs after a period of economic recovery, as inflation starts rising. During QE, the ECB injects liquidity by buying bonds, whereas QT entails halting bond purchases and not reinvesting capital from existing bonds, which can be bullish for the euro.
