Forex Today: GDP releases from major economies, BoC and Fed rate decisions to ramp up volatility
Here is what you need to know on Wednesday, July 30:
Financial markets turn relatively quiet early Wednesday as investors gear up for key events. In the European session, preliminary second-quarter Gross Domestic Product (GDP) from the Eurozone will be watched closely. The US economic calendar will feature ADP Employment Change for July and Q2 GDP data. More importantly, the Bank of Canada (BoC) and the Federal Reserve (Fed) will announce monetary policy decisions.
Following Monday's impressive rally, the US Dollar (USD) Index preserved its bullish momentum and touched its highest level since late June above 99.00 on Tuesday. Early Wednesday, the USD Index corrects lower and fluctuates at around 98.80. In the meantime, US stock index futures trade mixed, reflecting a cautious market stance. The Fed is widely anticipated to maintain policy settings after the July meeting. The statement language, and comments from Chairman Jerome Powell could influence market expectations for a rate reduction in September and drive the USD's valuation.
Although no major breakthroughs were announced following two days of talks between Chinese and US officials in Stockholm, both sides noted that the meetings were constructive. According to Reuters, officials have agreed to seek an extension of the 90-day tariff truce. US Treasury Secretary Scott Bessent said that President Donald Trump will decide whether to extend the truce period.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.76% | 0.50% | 0.19% | 0.43% | 1.10% | 0.97% | 0.99% | |
| EUR | -1.76% | -1.27% | -1.51% | -1.31% | -0.64% | -0.78% | -0.75% | |
| GBP | -0.50% | 1.27% | -0.44% | -0.04% | 0.63% | 0.49% | 0.50% | |
| JPY | -0.19% | 1.51% | 0.44% | 0.24% | 0.86% | 0.75% | 0.95% | |
| CAD | -0.43% | 1.31% | 0.04% | -0.24% | 0.64% | 0.54% | 0.55% | |
| AUD | -1.10% | 0.64% | -0.63% | -0.86% | -0.64% | -0.14% | -0.12% | |
| NZD | -0.97% | 0.78% | -0.49% | -0.75% | -0.54% | 0.14% | 0.00% | |
| CHF | -0.99% | 0.75% | -0.50% | -0.95% | -0.55% | 0.12% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In the Asian session, the data from Australia showed that the Consumer Price Index (CPI) rose by 0.7% on a quarterly basis in the second quarter. This reading followed the 0.9% increase recorded in the first quarter and came in below the market expectation of 0.8%. AUD/USD stays under modest bearish pressure after posting losses for four consecutive days and trades near 0.6500.
USD/CAD climbed to its highest level in five weeks near 1.3790 on Tuesday before going into a consolidation phase. The BoC is widely expected to keep the policy rate unchanged at 2.75%.
EUR/USD holds steady at around 1.1550 in the European morning on Wednesday after declining sharp to start the week. The data from Germany showed that the GDP expanded at an annual rate of 0.4% in the second quarter, coming in better than the market expectation of 0.2%.
GBP/USD trades in a narrow channel above 1.3350 after posting small losses on Tuesday.
After struggling to find direction on Tuesday, USD/JPY stays under bearish pressure on Wednesday and trades in negative territory at around 148.00.
Following a four-day slide, Gold staged a rebound and gained about 0.4% on Tuesday. XAU/USD holds steady near $3,330 in the European morning.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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