Gold prices steady as traders assess Fed rate outlook after soft US data
Investing.com - The U.S. dollar initially strengthened last week following robust second-quarter GDP data and a hawkish Federal Reserve press conference, but surrendered those gains after Friday’s payrolls report, according to Bank of America analysis.
Both the Dollar Index (DXY) and the Bloomberg Dollar Spot Index (BBDXY) finished largely unchanged for the week starting Monday, July 28, despite the volatility. Options market flows indicate a bearish bias toward the greenback, with one-month EUR/USD risk reversal relative to at-the-money volatility showing a 4.5% increase in demand for euro calls, despite the spot price remaining stable compared to the previous week.
The dollar’s July bounce neutralized several downtrends against G10 currencies, but Bank of America notes the U.S. currency remains in more downtrends than uptrends overall. Specifically, the dollar continues its downward trajectory against the euro, Swiss franc, and Australian dollar, while maintaining an uptrend only against the Japanese yen.
USD/CAD could potentially resume its downtrend this week following the release of Canadian labor force data. Bank of America economists anticipate this report will show the beginning stages of a labor market rebound in Canada.
The currency market’s current positioning suggests continued pressure on the dollar despite its temporary strength in July, with options flows particularly indicating expectations for euro appreciation against the greenback.
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