USD Struggles to Extend Rebound as Markets Await Key US Data

The US Dollar (USD) is finding it difficult to sustain Thursday’s recovery against major peers, as traders shift focus to critical economic releases due later on Friday. The US calendar features July Retail Sales, Industrial Production, and the University of Michigan’s Consumer Sentiment Survey—including updates on confidence levels and 1-year inflation expectations.

Weekly USD Performance Snapshot

The greenback has underperformed against the British Pound this week, while posting modest gains against the Canadian Dollar and Swiss Franc. The British Pound has led gains across the G10 space.

Macro Drivers Behind Thursday’s USD Move

Thursday’s bounce came after the Producer Price Index (PPI) for July jumped to 3.3% YoY from 2.4% in June—its fastest pace in three years—while core PPI climbed to 3.7% YoY from 2.6%. The data signaled stronger wholesale inflationary pressures, supporting US Treasury yields and giving the USD a short-term boost.

However, rate cut expectations remain in play. The CME FedWatch Tool still shows high odds of a September Fed rate cut, as the market weighs hot producer data against earlier softer consumer inflation numbers.

Asia Session Highlights

In early Friday trade, China’s July Retail Sales rose 3.7% YoY (vs. 4.6% expected) and Industrial Production grew 5.7% (vs. 5.9% forecast), both missing expectations and dampening risk sentiment for commodity-linked currencies like the Australian Dollar.

AUD/USD: Rebounded above 0.6500 after Thursday’s 0.8% drop.
USD/JPY: Under pressure near 147.00 despite stronger-than-expected Japan Q2 GDP growth at 1% annualized (vs. 0.4% forecast).
EUR/USD: Holding above 1.1650 with no key Eurozone data on tap.
GBP/USD: Stabilizing above 1.3550 after Thursday’s 0.3% decline.

Commodities & Gold

Gold retreated over 0.5% on Thursday as yields climbed, dragging XAU/USD below $3,350. The metal remains steady in early European trading, awaiting US data for the next directional cue.

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Yasher Rizwan