US Dollar posted moderate losses ahead of key data events

Here is what you need to know for July 18:

During the Asian session, Australia will release The Reserve Bank of Australia minutes that could offer a few insights for the August rate decision, with the governor Phillip Lowe recently signalling that the RBA is taking a data-dependent approach. Thereafter, in the US, Retail Sales will be a focus which may have advanced for a third consecutive month in June and such an outcome would be expected to support the US Dollar. 

Meanwhile, on Monday, the Greenback, as measured by the  US Dollar index, DXY, posted modest losses after hawkish comments from the European Central BankGoverning Council member and Bundesbank President Nagel while lower Treasury yield also weighed.

There was an initial bid in the Greenback due to the stronger-than-expected July Empire manufacturing survey and weaker-than-expected Chinese growth numbers for the second quarter along with a disappointment in the June RetailSsales data. The US July Empire manufacturing survey of general business conditions index fell -5.5 to 1.1, stronger than expectations of -3.5. The DXY index travelled between 99.753 and 100.181. 

EUR/USD subsequently hit a 16-1/2 month high at 1.1249 while ECB’s Nagel, said, “I expect the ECB will raise interest rates later this month by 25 bp” as core inflation in the Eurozone is “very sticky” but “for the September meeting, we will see what the data will tell us.” He added, “the economic recovery in the future course of the year could be somewhat more hesitant than expected in the June forecast, and core prices will probably stay “very high over the summer.”

GBP/USD fell for a second day and is making a correction of the recent rally. GBP/USD travelled between a low of 1.3087 and 1.3108 in a tight range. Market expectations of further interest-rate rises from the Bank of England combined with a resilient UK economy have been supported the Pound Sterling of late. This week will hold  UK inflation and Retail Sales as the key events along with the four by-elections that are likely to get some attention.

USD/JPY on Monday fell on the weakness in the US Treasury yields that set off some short covering in the yen.
However, there is speculation the Japanese central bank, the Bank of Japan may refrain from ending its stimulus measures or changing its yield-curve control policy. The BoJ Governor Ueda said not much has changed on bond market functionality from the BOJ’s last policy meeting in June. Meanwhile, markets were closed in Japan for the Marine Day holiday. 

AUD/USD  was offered in a continuation of the daily correction. The pair dropped from a high of 0.6843 to a low of 0.6787. The Reserve Bank of Australia minutes will be released and are expected to provide additional insight into the Board’s “finely balanced” decision to pause in July. ”Discussion on inflation risks is likely to be balanced. We have recently changed our RBA call, pencilling in an extended pause at the current cash rate of 4.1%, but we can’t entirely rule out a hike in August,” analysts at ANZ Bank said. ”Looking into 2024 our base case remains an extended pause before easing toward the very end of the year driven by both a higher unemployment rate and confidence inflation is returning to the band.”

Meanwhile, precious metals prices on Monday closed moderately lower as the risk-on sentiment on Wall Street took away the appeal for both Gold and Silver. Additionally, the worries over Chinese demand for industrial metals were a factor, more so for Silver. ”As fears were rising that the Fed’s bark could be as bad as its bite, weaker inflation is likely to tame these concerns for now and could see the yellow metal solidify in a higher range. With that said, CTAs could modestly add to upside flow north of $1974/oz,” analysts at TD Securities said with regards to the Gold price.

Elsewhere, Bitcoin was weaker and fell below the $30k mark on regulatory worries. Crude oil prices posted moderate losses on weaker-than-expected Chinese economic reports and the restart of crude oil production in Libya as protesters left oilfields. WTI was down some 1.5% at $74.00 from $76.05.