The foreign exchange world was caught off guard by the unexpected rate hike from the Bank of Japan on Wednesday, while the Federal Reserve decided to keep its policy rate unchanged, hinting at a potential rate cut in September. Coming up next is the Bank of England, with uncertainty surrounding the possibility of a rate reduction.
On Thursday, August 1, the US Dollar Index (DXY) was impacted by the strength of the Japanese Yen following the BoJ’s announcement and the slightly dovish tone from Federal Reserve Chairman Powell. The focus for the day was on the ISM Manufacturing PMI, Initial Jobless Claims, Construction Spending, and the final S&P Global Manufacturing PMI.
In the currency market, the EUR/USD pair saw a reversal in its weekly retracement, dipping back down towards the 1.0850 level. The day brought data releases such as the final HCOB Manufacturing PMIs for Germany and the Eurozone, as well as the ECB Economic Bulletin and Eurozone Unemployment Rate.
Meanwhile, the GBP/USD pair saw some modest gains around 1.2850 as traders awaited the Bank of England’s rate decision. Alongside this, the UK also had Nationwide Housing Prices and the final S&P Global Manufacturing PMI on its economic calendar.
The surprise rate hike from the Bank of Japan caused the USD/JPY pair to drop significantly, breaching the key support level at 150.00 and hitting fresh four-month lows. Japan’s only noteworthy release on August 1 was the weekly Foreign Bond Investment data.
As for the Australian Dollar, the AUD/USD pair continued to lose ground, dropping below the 0.6500 support level and potentially setting the stage for further losses in the short term. Australia was expecting the final Judo Bank Manufacturing PMI and Balance of Trade figures.
In the commodities market, WTI prices experienced some relief due to escalating geopolitical tensions and a decrease in weekly US crude oil inventories, pushing prices back towards the $78.00 per barrel mark. Gold prices also saw an increase, reaching the $2,440 per ounce level, while Silver followed suit and approached $29.00 per ounce.
