Friday Update: Financial Market Overview
Here’s a brief summary for Friday, July 18th:
The financial markets exhibited a rather calm demeanor this morning. The US Dollar (USD) is currently holding steady, consolidating its weekly gains around the 98.50 mark. A few hours from now, we’ll see the release of building permit data on the US economic calendar. Additionally, the University of Michigan is set to unveil its July Consumer Sentiment Index later in the day.
This week’s US Dollar Price
The table below illustrates how the US dollar (USD) has fluctuated against various currencies this week, with the USD showing notable strength against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.37% | 0.45% | 1.06% | 0.27% | 0.89% | 0.76% | 0.64% | |
| EUR | -0.37% | 0.06% | 0.71% | -0.11% | 0.51% | 0.36% | 0.26% | |
| GBP | -0.45% | -0.06% | 0.58% | -0.17% | 0.45% | 0.33% | 0.33% | |
| JPY | -1.06% | -0.71% | -0.58% | -0.67% | -0.17% | -0.24% | -0.38% | |
| CAD | -0.27% | 0.11% | 0.17% | 0.67% | 0.61% | 0.50% | 0.37% | |
| AUD | -0.89% | -0.51% | -0.45% | 0.17% | -0.61% | -0.15% | -0.25% | |
| NZD | -0.76% | -0.36% | -0.33% | 0.24% | -0.50% | 0.15% | -0.13% | |
| CHF | -0.64% | -0.26% | -0.33% | 0.38% | -0.37% | 0.25% | 0.13% |
The heatmap gives an overview of the changes in major currencies. The base currency is taken from the left column, with the target currency from the top row. For instance, selecting USD from the left and JPY from the top shows how USD has performed against JPY.
In terms of USD, it gained traction following positive economic releases yesterday. Retail sales data indicated a 0.6% rise in June, beating market predictions, while weekly jobless claims dropped from 228,000 to 221,000. As a result, the USD index went up over 0.3%, and both the S&P 500 and NASDAQ Composite achieved record highs, increasing by 0.55% and 0.75%, respectively.
On another note, Federal Reserve Governor Christopher Waller mentioned late in the day that he continues to support cutting interest rates in the July meeting, pointing to potential economic risks and tariff-driven inflation that may not lead to prolonged price increases.
As for the EUR/USD, after hitting a three-week low below 1.1560 yesterday, it has started to rebound due to early USD weaknesses, trading above 1.1600. We also have construction output data for May coming from the European Economic Calendar.
The GBP/USD maintains a slight daily gain, hovering just above 1.3400 after remaining mostly unchanged yesterday.
On the other hand, AUD/USD is attempting to recover from significant losses on Thursday, currently trading around 0.6500 in the European session.
Following a steep fall on Wednesday, USD/JPY climbed roughly 0.5% on Thursday and is holding steady early Friday, inching towards 149.00.
In commodities, gold prices dipped below $3,310 during early American trading but mostly recovered, closing near $3,340. The XAU/USD is currently fluctuating around $3,345, searching for a clear direction.
Risks of Sentiment FAQ
In finance, terms like “risk-on” and “risk-off” describe how willing investors are to take risks. In a “risk-on” environment, investors tend to be optimistic, while in a “risk-off” situation, they prioritize safer assets.
Typically, during “risk-on” phases, stock markets rise, and although most commodities gain value, gold often behaves differently. Currencies tied to commodity exports tend to strengthen, anticipating increased demand, while during “risk-off,” bonds become more attractive, and currencies like the yen and franc often gain traction.
Minor currencies, such as the AUD, CAD, and NZD, usually benefit during “risk-on” periods due to their economies relying heavily on exports. The increased demand for raw materials during these times often helps elevate their values.
Conversely, the major currencies that appreciate in “risk-off” markets include the USD, JPY, and CHF. The USD, as a global reserve currency, tends to be a safe haven during crises, while the JPY and CHF are favored due to their robust governmental backing and stringent banking laws.
