Forex Today: US Dollar tumbles after divided Fed hold, Oil surges on Middle East escalation

Here is what you need to know for Thursday, July 30:

The US Dollar (USD) falls sharply during the American session on Wednesday after the Federal Reserve (Fed) left interest rates unchanged. The Federal Open Market Committee (FOMC) maintained the federal funds target range at 3.50%–3.75% in a divided 9–3 vote. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan preferred a 25-basis-point increase. The Fed said that economic activity continues to expand at a solid pace, while inflation remains elevated partly because of energy-related supply shocks.

The US Dollar Index (DXY) fell around 0.5% and trades near 100.90. Despite the hawkish dissenting votes, the decision to remain on hold raised doubts about whether enough policymakers will support a rate increase at the September meeting. The immediate reaction also pushed US Treasury yields lower and encouraged broad selling of the Greenback.

EUR/USD advances around 0.7% and trades near 1.1470, reaching its highest area in more than a week as the US Dollar weakens. On Thursday, investors will monitor preliminary second-quarter Gross Domestic Product figures from Spain, Germany, Italy, and the broader Eurozone. Germany will also publish preliminary July inflation data, while Eurozone economic sentiment and unemployment figures will provide additional indications about the regional outlook.

GBP/USD rises around 0.5% and trades near 1.3360 ahead of the Bank of England’s monetary policy announcement on Thursday. The BoE is expected to leave its Bank Rate unchanged at 3.75%. Attention will focus on the voting split, the Monetary Policy Report and Governor Andrew Bailey’s comments for signals about whether policymakers remain open to another interest rate increase.

USD/JPY falls around 0.2% and trades near 163.50 as the broad decline in the Greenback allows the Japanese Yen to recover modestly. However, the pair remains close to multi-decade highs due to the wide interest rate differential between the United States and Japan. Thursday’s Japanese calendar will feature Tokyo inflation, unemployment, and Retail Sales data.

AUD/USD remains under pressure near 0.6945, falling around 0.4% despite the weaker US Dollar. The Australian Dollar continues to suffer after June inflation undershot market expectations, sharply reducing the likelihood of another Reserve Bank of Australia rate increase. Australia will publish June Building Permits on Thursday after the indicator declined 1.1% in May.

West Texas Intermediate (WTI) Oil surges more than 7% and trades near $85 per barrel as the conflict in the Middle East intensifies. The United States and Saudi Arabia launched strikes against Iran-backed groups in Iraq following attacks on Saudi energy facilities, while Iran targeted US forces in Jordan. The renewed escalation has raised concerns about regional supply disruptions and reduced expectations of a rapid diplomatic resolution.

Gold rises around 0.7% and trades near $4,056 per troy ounce. The precious metal benefits from the sharp decline in the US Dollar and renewed safe haven demand amid the Middle East conflict. Lower US Treasury yields following the Fed decision also support the non-yielding metal.

Thursday’s United States calendar will include preliminary second quarter GDP and the Fed’s preferred Personal Consumption Expenditures inflation measures. Annualized GDP growth is expected to remain at 2.1%, while Core PCE inflation is forecast to rise 0.2% MoM and 3.3% YoY in June. Initial Jobless Claims are expected to increase to 200K from 187K, while Personal Income and Personal Spending are both forecast to rise 0.3%.