Currency markets remained volatile on Wednesday as the US Dollar (USD) extended its slide to a two-week low, with traders adjusting positions ahead of key inflation readings, UK GDP results, and Australia’s jobs report. Brokers from Fletrade say the move reflects both growing conviction in US rate cuts and ongoing investor caution over Federal Reserve policy dynamics.
Dollar Weakness Deepens as Rate Cut Bets Rise
The US Dollar Index (DXY) continued its decline, falling below the critical 98.00 support level and accelerating losses in step with a marked pullback in US Treasury yields. Market participants are increasingly factoring in additional Federal Reserve rate cuts, following recent inflation data and cautious remarks from policymakers.
Thursday’s calendar will put the US Producer Price Index (PPI) figures in the spotlight, accompanied by weekly Initial Jobless Claims. Analysts will also monitor remarks from Fed official Thomas Barkin, which could offer fresh insight into the central bank’s policy trajectory.
Euro Climbs to Two-Week Highs
The EUR/USD pair advanced past 1.1700, touching a fresh two-week high amid a broad improvement in risk sentiment. Gains were supported by expectations of steady European Central Bank policy and improving macroeconomic data in the euro area.
Investors will closely watch the eurozone’s Employment Change, Industrial Production, and the second estimate of Q2 GDP growth, all of which could shape short-term currency direction. Strategists note that sustained movement above 1.1700 could open the door to further technical upside, especially if US data underperforms.
Sterling Extends Rally Ahead of UK GDP Data
The GBP/USD pair maintained its bullish momentum, testing multi-week highs near the 1.3600 mark. Optimism around the UK’s economic resilience and reduced fears of aggressive Bank of England easing have contributed to the rally.
Thursday’s UK calendar is packed, featuring GDP figures, Trade Balance, Industrial and Manufacturing Production, Construction Output, and the NIESR Monthly GDP Tracker. Some brokers highlight that the GDP print will be especially important, as it will provide a more comprehensive picture of how the economy is weathering global headwinds.
Yen Gains as USD/JPY Slips to Weekly Lows
The USD/JPY pair retreated toward the 147.00 level, pressured by continued US dollar weakness and safe-haven demand for the yen. Market focus now shifts to Japan’s preliminary Q2 GDP figures, due on August 15, along with weekly Foreign Bond Investment data.
The yen’s short-term direction will hinge on whether Japanese growth data signals a sustained recovery or points to a slowdown requiring further Bank of Japan support.
Australian Dollar Climbs Ahead of Jobs Report
The AUD/USD pair extended gains from earlier in the week, reaching the 0.6560–0.6570 range, its highest in two weeks. The rally comes ahead of Australia’s labour market report, which is expected to be a key driver of Reserve Bank of Australia policy expectations.
“Employment numbers will be crucial,” says a macro analyst. “A stronger-than-expected reading could reinforce the RBA’s cautious approach to rate cuts, whereas weak data could trigger renewed downside in the Aussie.”
Oil Prices Under Pressure
WTI crude slid below $62.00, its lowest since early June, after the IEA projected stronger supply growth, and US crude inventories unexpectedly rose. Analysts warn prices may stay pressured without a demand rebound, though no major geopolitical risks have emerged.
Gold and Silver Extend Gains on Fed Speculation
Gold prices rose to around $3,370 per troy ounce, hitting a two-day high, as expectations for additional US rate cuts in the second half of the year drove renewed demand for the precious metal. Silver also gained, breaking above $38.00 per ounce to reach a three-week peak.
According to many commodity strategists, the metals rally reflects a combination of weaker yields, a softer dollar, and investors’ desire for portfolio hedges amid uncertain global growth prospects. “If upcoming US inflation prints confirm a cooling trend, we could see gold push toward new record highs,” one broker noted.
Key Events to Watch
The next 48 hours bring several high-impact events across global markets:
- United States: PPI, Initial Jobless Claims, and Fed commentary from Thomas Barkin.
- Eurozone: Employment Change, Industrial Production, and final Q2 GDP.
- United Kingdom: GDP, Trade Balance, Industrial/Manufacturing Production, Construction Output, NIESR GDP Tracker.
- Japan: Preliminary Q2 GDP and Foreign Bond Investment data.
- Australia: Labour Market Report.
Brokers caution that with multiple currencies testing key resistance levels, any deviation from the forecast in these releases could trigger significant volatility in forex markets.
Outlook
Currency markets enter Thursday’s session with a clear theme: dollar softness, broad-based risk appetite, and heightened sensitivity to economic surprises. If US inflation indicators disappoint, the greenback could face additional downside pressure, bolstering the euro, pound, yen, and commodity-linked currencies.
However, Fletrade warns that the rally in risk-sensitive assets remains vulnerable to shifts in sentiment. “This is a data-heavy stretch,” says a senior broker. “One strong or weak print can flip market positioning quickly. Flexibility is essential.”
As traders position for a critical set of economic releases, attention will remain firmly fixed on whether recent trends, dollar weakness, commodity strength, and gains in high-beta currencies can sustain into the next week.
