On Tuesday, the foreign exchange market was extremely active, with a whopping $60 billion traded. The US Dollar blasted off while the Australian Dollar and Euro, among a handful of others, crumbled and plummeted. The EUR/USD currency pair hovered around daily lows near 1.1370, reflecting the broader trend influenced by economic data releases and central bank discussions.
As a result, on Tuesday the US Dollar jumped tremendously. This jump followed a very positive Job Openings and Labor Turnover Survey (JOLTs) report released earlier this month. The surprise move in labor market data restored confidence in the Greenback. This occurred in spite of extremely disappointing US Factory Orders figures released concurrently. Consequently, the EUR/USD pair deflated to their daily lows around 1.1370 after these developments.
At the same time, the Australian Dollar continued to show signs of a bearish bias as uncertainty around the Reserve Bank of Australia’s (RBA) policy stance weighed. Documents released by the RBA following its July meeting highlight the fact that RBA board members strongly opposed a more aggressive 50 basis points interest rate cut. In the end, they decided to go for a 25 basis points cut instead. This decision was meant to help ensure a high level of predictability in the economic environment. After this announcement, AUD/USD plummeted down to 0.6460, giving back some of the gains made during a strong rally seen on Monday.
The British Pound was under pressure around the 1.3500 figure. This was mainly down to the more favourable US Dollar which continued to set the tone for trading conditions. Traders are closely watching upcoming economic indicators, with US JOLTs Job Openings due later in the day, which could further impact the Dollar’s strength and market sentiment.
Gold prices reflected market uncertainty, approaching daily lows of $3,330 after falling from a multi-week high above $3,400 set on Monday. This drop highlighted deteriorating investor sentiment amid volatile currency movements and changing currency outlooks.
Market participants are looking ahead to second quarter Australian GDP data due for release on Wednesday. In addition, they are preparing for the Nonfarm Payrolls (NFP) report due out on Friday. We’ll get a clearer look at long-term economic trends in the coming indicators. Perhaps more importantly, their macroeconomic effects will filter down to currency valuations over the coming days.