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Scotiabank strategists Shaun Osborne and Eric Theoret note GBP/USD is slightly weaker as it gives back part of yesterday’s strong advance, helped by expectations of a centrist, market-friendly Burnham government. United Kingdom (UK) data were mixed, with robust Gross Domestic Product (GDP) offset by softer Industrial Production. From a technical perspective, they argue the early July bull reversal remains intact and see scope for gains toward at least 1.3650.

Bull trend targets retest of 1.3650

"The GBP is a mild underperformer on the session as markets give back some of yesterday’s solid gains. Investors appear to have been cheered by reports suggesting that team Burnham has vetoed Ed Miliband as an option for chancellor, preferring instead current Home Sec. Mahmood."

"PM-to-be Burnham’s rumored top team is going to be centrist which also means market-friendly. But that will ruffle feathers of left-wingers who effectively pushed Starmer out."

"UK data released earlier was mixed. UK May GDP was stronger than forecast, rising 0.7% in 3m/3m terms. The UK economy saw solid growth in H1 overall. But May Industrial Production was weaker than expected (-0.5% M/M), albeit with very mixed components while the Trade deficit narrowed."

"Bullish—Sterling has given back a little of yesterday’s solid gain but the spurt higher has livened up the charts and sets the pound up for a further extension of the early July bull reversal."

"The fresh short-term cycle high and a bullish alignment of short-, medium-, and long-term trend oscillators suggest minor dips are a buy and that GBP gains can extend towards a retest of 1.3650 at least in the near-term. EUR/GBP is trading back from yesterday’s one-year low but technical trends here also look positive for the pound overall."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The Japanese Yen is recovering modestly on Thursday after several days of weakness.
• Markets continue to expect another European Central Bank rate hike later this year.
• Middle East tensions and higher energy prices are keeping risk aversion elevated.

EUR/JPY trades around 185.80 at the time of writing on Thursday, little changed on the day after reaching a one-month high earlier this week. The pair is edging slightly lower as the Japanese Yen (JPY) regains some footing, although expectations of further monetary tightening by the European Central Bank (ECB) continue to provide underlying support for the Euro (EUR).

Investors remain cautious as renewed hostilities involving Iran continue to push Oil prices higher and fuel concerns about a fresh inflationary shock. The rise in risk aversion is supporting the Japanese Yen, although the negative impact of higher energy costs on Japan's economy is limiting the currency's upside for now.

In the Eurozone, several European Central Bank (ECB) officials have recently reiterated their willingness to tighten monetary policy further if inflation risks intensify. Austrian central bank Governor and ECB Governing Council member Marin Kocher said the central bank stands "ready to act" should second-round inflation effects emerge, while Bundesbank President and ECB Governing Council member Joachim Nagel stated that it remains appropriate to "act decisively" if necessary.

These comments come as a Reuters poll shows that a large majority of economists expect the ECB to leave its deposit rate unchanged at 2.25% at its July meeting, while around 70% anticipate one additional rate hike before the end of the year, most likely in September. Rabobank shares this baseline scenario, arguing that the renewed escalation in the Middle East has increased upside inflation risks but is still unlikely to trigger a rate hike in July. ING also believes that a July hike remains a risk, although September continues to be the more likely outcome.

In Japan, doubts surrounding the government's plan to repatriate part of the Government Pension Investment Fund (GPIF) overseas investments continue to weigh on the Japanese Yen. Investors remain skeptical about how quickly the initiative can be implemented, limiting its positive impact on the currency. Japan's Finance Minister Satsuki Katayama nevertheless reiterated on Thursday that authorities stand ready to intervene in the foreign exchange market if necessary, while declining to comment on specific exchange rate levels.

• DJIA trades near 52,800, up roughly 160 points, outperforming the S&P 500 and NASDAQ as chip stocks bleed.
• UnitedHealth jumps more than 6% on an earnings beat, doing the price-weighted heavy lifting while more than 87% of early reporters top estimates.
• Initial Jobless Claims at 208K and a five-year high in the Philadelphia Federal Reserve survey flatter the real economy.

The Dow Jones Industrial Average (DJIA) added roughly 160 points, or 0.3%, to trade near 52,800 on Thursday while the S&P 500 slipped 0.2% and the NASDAQ Composite shed 0.9%. An early dip to 52,586 found buyers within the first hours, and the index has since ground to a session high at 52,828, leaving last week's record at 53,333 within 1% of the tape. The blue-chip benchmark is the only major index in the green, and the reason is as much about what it lacks as what it holds.

Outperformance by subtraction

Semiconductors are Thursday's problem, and the Dow Jones Industrial Average barely owns any. Taiwan Semiconductor (TSM) beat second-quarter expectations but raised its capital spending guidance to between $60 billion and $64 billion from a prior $52 billion to $56 billion range, and the market read the bill rather than the beat. The stock trades down about 2%, while Arm Holdings (ARM) drops more than 7%, Micron (MU) more than 5%, Advanced Micro Devices (AMD) more than 4%, Broadcom (AVGO) more than 3%, and the American listing of SK Hynix (SKHY) craters more than 9%.

The Dow's only pure semiconductor, Nvidia (NVDA), declined less than 3% but only makes up about 2.3% of the index.

The index's escape route runs through a health insurer. UnitedHealth Group (UNH) advances more than 6% after easily topping expectations. In a price-weighted construction, one expensive stock outweighs a sector's worth of silicon grief. Add the banks that cleared their bar earlier in the week and a beat rate above 87% across the first 40 S&P 500 reporters, and Thursday's leadership looks less like rotation into the old economy than rotation away from everything the old economy never bought. Strategists' verdict that earnings strength runs across all caps only sharpens the point; the weakness is concentrated in one crowded trade.

The data flatters main street and complicates the Federal Reserve

The 12:30 GMT data sweep came in hot where it counts. Initial Jobless Claims fell to 208K against a 217K consensus; the Philadelphia Federal Reserve's manufacturing index soared to 41.4 versus 13 expected, its strongest reading since November 2021; and the New York Federal Reserve's services gauge posted 8.7, its first positive reading in nearly two years. Retail Sales rose 0.2% MoM as expected with the Control Group matching its 0.5% consensus, though the Ex-Autos read slipped 0.2% and gasoline stations gave up 5.3% on falling pump prices.

Strength cuts both ways under a central bank that has removed its easing bias. Futures assign roughly an 83% probability to a rate hold at the July 28 to 29 Federal Reserve (Fed) meeting, September pricing tilts toward a hike, and half the committee's June projections penciled in at least one increase this year. Tuesday's cooler inflation print bought the doves a hearing, which is precisely why a 41-handle factory survey lands awkwardly. Three Fed speakers, including the Vice Chair, take the microphone from 16:30 GMT. Pending Home Sales, down 5.4% MoM against a 0.5% decline expected, supplied the 14:00 GMT reminder that the rate-sensitive corners are enjoying none of this.

A record within reach and nobody sprinting

The index sits within striking distance of its all-time high and trades like it would rather not discuss it. Volume-light grinding, a leadership list one earnings report deep, and a Middle East that reinstated a naval blockade this week without denting equities describe a market long of complacency and short of new money.

Daily momentum agrees with the hesitation: the Stochastic Relative Strength Index eases through the low 60s even as price holds within a percent of the top, the signature of a market marking time rather than accumulating. That posture holds until either the record breaks on its own or Friday's data hands the tape an excuse.

Friday brings the sentiment check

Friday's docket opens with June Housing Starts and Building Permits at 12:30 GMT, numbers that inherit extra weight after Thursday's Pending Home Sales miss, followed by Industrial Production at 13:15 GMT. The main event is the University of Michigan's preliminary July Consumer Sentiment report at 14:00 GMT, expected to rise to 51 from 49.5, alongside one-year inflation expectations last seen at 4.6%. A consumer who keeps spending through inflation expectations north of 4% is the entire bull case for the real-economy index. An expectations spike hands the hawks the back half of July.

Technical levels

Resistance: The session high at 52,828 caps the day so far, with the record at 53,333 the only structure above it on the daily chart.

Support: Thursday's low at 52,586 is the near shelf. Below that, the 52,000 handle and the rising 50-day Exponential Moving Average at 51,349 frame the July uptrend.

Bias: Higher. Breadth is ugly, but this index does not carry the ugly parts. Earnings are beating, the real-economy data is accelerating, and a hold above 52,586 keeps a record retest as the path of least resistance into next week.

Dow Jones daily chart

• NZD/USD holds near a one-month high as the RBNZ's hawkish stance supports the Kiwi.
• The US Dollar rebounds after a two-day decline, limiting the pair’s upside.
• NZD/USD keeps a bullish bias while holding above the 50, 100 and 200-day SMAs.

NZD/USD fluctuates between minor gains and losses on Thursday as the Reserve Bank of New Zealand’s (RBNZ) hawkish stance supports the Kiwi, while a stronger US Dollar (USD) caps the upside. At the time of writing, the pair trades around 0.5842 after climbing to a one-month high earlier this week.

The Greenback is regaining its footing after a two-day decline triggered by softer-than-expected US inflation data. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 100.70 after falling to 100.35 on Wednesday, its lowest level since June 18.

From a technical perspective, NZD/USD holds above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), clustered between 0.5807 and 0.5831, supporting a constructive near-term outlook.

The Relative Strength Index (RSI) stands at 63, indicating bullish momentum without reaching overbought territory. Meanwhile, the Moving Average Convergence Divergence (MACD) remains above zero, suggesting that buyers retain the upper hand.

On the downside, immediate support lies at the 100-day SMA of 0.5831, followed by the 200-day SMA at 0.5819 and the 50-day SMA at 0.5807. Below these levels, the horizontal supports at 0.5770 and 0.5700 could come into play.

On the topside, initial resistance is seen at the horizontal barrier near 0.5870. A sustained break above this level could open the door to additional gains.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Retail Sales meet forecasts, while jobless claims surprise lower.
• Middle East attacks revive energy risks and Fed hike bets.
• Mahmood appointment speculation eases UK fiscal discipline concerns.

The Pound Sterling trims some of its Wednesday gains versus the US Dollar, down by over 0.48% following solid US data. The sell-off comes amid risk aversion and augments the safe-haven appeal of the Greenback. At the time of writing, the GBP/USD trades at 1.3375, after peaking near 1.3545.

GBP/USD slips as strong claims data and geopolitics lift Dollar

US Retail Sales in June increased 0.2% MoM, as expected. Gasoline prices eased from $4.61 in May to $4.18 in the last month, leaving consumers with free money for discretionary spending. Excluding gasoline and autos, Retail Sales expanded 0.4% MoM, down from 0.5%

Other US data showed that jobless claims for the week ending July 11 fell from 216K to 208K, below estimates for a 217K increase. On Wednesday, the Federal Reserve’s (Fed) Beige Book noted that the “employment rose on balance,” in July, with some districts “showing modest, moderate or solid gains.”

The Greenback rises some 0.23% as the US Dollar Index (DXY), which tracks the buck’s value against a basket of six currencies, is at 100.72, bolstered by US data and the Middle East conflict.

Hostilities continued on Thursday with the US launching attacks on Qeshm Island and also hitting an Oil tanker. Iran retaliated, launching strikes on American bases in Kuwait and Jordan.

The potential disruption to energy supply has increased speculation that the Fed could raise rates this year. In July, the odds are very slim, with a 73% chance of holding rates unchanged, but for the October 28 meeting, the chances of a rate increase rose to nearly 57%, according to Prime Terminal data.

In the UK, the economy grew modestly by 0.1% in May, up from a -0.1% contraction reported in April. The three-month rollover, which jumped 0.7% to May, exceeded estimates of a 0.5% increase and was unchanged from the previous print.

Aside from this, the incoming UK Prime Minister, Andy Burnham, is expected to appoint Shabana Mahmood as finance minister instead of Ed Miliband, easing concerns about fiscal discipline.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades around 1.3484, maintaining a mildly bullish near-term bias as it holds above the Simple Moving Average (SMA) cluster near 1.3385. Price is pressing just under a descending resistance trendline at 1.3489, while the Relative Strength Index (RSI) at 60 leans to the positive side, suggesting buyers retain the upper hand as long as the pair stays supported above the moving average base.

On the topside, immediate resistance is seen at the downtrend line break level at 1.3489, followed by a secondary barrier at the upward trend-line break zone near 1.3495, where supply could initially cap advances. On the downside, the first important support emerges at the SMA region around 1.3385, and a sustained hold above this floor would keep the broader constructive tone intact despite nearby trendline congestion.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• WTI trades near 79.10 after tagging 80.29 on Houthi threats against Saudi Oil infrastructure.
• Yemen's rebels threaten all Saudi oil sites and key facilities if Riyadh escalates.
• A reinstated American naval blockade and fresh strike waves on Iran barely moved the tape this week.

West Texas Intermediate (WTI) Oil spent Thursday's European morning grinding down to 78.37 before ripping nearly two dollars to 80.29 when the Houthis threatened to target all Saudi Oil sites and key facilities should Saudi Arabia escalate its actions against Yemen. The bid did not survive the 50-day Exponential Moving Average (EMA) at 80.21. The American benchmark now changes hands near 79.10, down 0.81% on a session that priced a supply catastrophe and then thought better of it.

The threat lands on the bypass, not the sideshow

Thursday's warning caps a four-day escalation ladder that began on a runway rather than an oil field. Yemen's Saudi-backed government bombed Sanaa airport on Monday to stop an Iranian aircraft carrying a Houthi delegation home from Tehran. The Houthis answered with ballistic missiles and drones at Abha International Airport, their heaviest strike on the Kingdom since the 2022 truce froze the war. Then they warned airlines out of Saudi airspace and floated a siege of the country outright.

Markets have filed the Yemeni front as a sideshow to Hormuz, and the filing is exactly backwards. Riyadh has spent this conflict rerouting a growing share of exports through the East-West Pipeline to Yanbu on the Red Sea, the quiet assumption that keeps Saudi barrels priced as reliable whatever Iran does at the Strait. A Houthi campaign against Saudi facilities, alongside the group's open musings about the Bab al-Mandeb chokepoint, aims squarely at that workaround. The 2019 Abqaiq strike briefly took Saudi output from 9.8 to roughly 4.1 million barrels per day, and the group is now advertising a sequel with a longer target list.

Hormuz fatigue is doing the heavy lifting

The backdrop this premium faded against is what makes the fade notable. Washington reinstated its naval blockade of Iranian ports on Tuesday after Tehran attacked seven commercial vessels in a week, leaving roughly a dozen crew dead, missing or injured, and American forces followed with back-to-back strike waves, the latest a seven-hour operation against dozens of military targets along Iran's coastline. Trump, having declared last month's peace framework over at the NATO summit, is now floating American transit fees for the Strait.

Crude Oil barely moved on Wednesday in response to any of it, and the numbness has an explanation. Traders have been whipsawed since February through a ceasefire, its collapse, its resurrection in June, and its collapse again.

Energy analysts read the reimposed blockade as resetting the conflict on an escalatory trajectory, while Washington's waiver for Indian purchases of Russian barrels caps every rally from the supply side. The tape now pays up only for headlines it has not seen before, and a direct threat to Saudi production qualified, briefly.

The fade is a position, not an opinion

Consensus positioning still banks on cooling tempers, on the theory that both Washington and Tehran keep signalling they want a deal more than a war. That is a defensible read of intent and a poor read of control, because the actors multiplying fastest, the Houthis among them, are precisely the ones no negotiating table binds. Every barrel of premium sold at the 50-day EMA is a bet that nobody on the periphery gets a vote.

What flips the trade is contact rather than rhetoric, and the distinction is narrowing. A confirmed strike on Saudi metal, or Houthi action at Bab al-Mandeb that forces tankers into longer routings, converts Thursday's 90-minute premium into a standing one. Until then, sellers lean on the belief that Gulf producers can route or replace whatever the headlines threaten. That belief has held all year. It has also never been tested on two chokepoints at once.

Friday hands the Dollar the microphone

Thursday's American data leaned supportive for demand, with Initial Jobless Claims at 208K against a 217K consensus and the Philadelphia Federal Reserve's Manufacturing index exploding to 41.4 versus 13 expected, its strongest print since November 2021. Three Federal Reserve speakers follow from 16:30 GMT. Friday brings housing starts and building permits at 12:30 GMT, industrial production at 13:15 GMT, then the University of Michigan's preliminary July sentiment survey at 14:00 GMT. The latter is seen at 51 from 49.5 with one-year inflation expectations last at 4.6%. A hot expectations print feeds the central bank's hawkish tilt, firms the US Dollar, and taxes every Dollar-denominated barrel.

Technical levels

Resistance: The 50-day EMA at $80.21 and the session high at $80.29 form a single ceiling, and the daily chart offers little structure beyond that cluster before the mid-80s zone where June's collapse began.

Support: The session low at $78.37 guards the tape, with the rising 200-day EMA at $77.34 beneath it as the structural floor of the two-week recovery off the July base.

Bias: Higher. The daily Stochastic Relative Strength Index is climbing through the 60s with room overhead, dips keep finding buyers, and the threat surface is widening faster than the premium. A daily close above $80.21 confirms the breakout, while only a loss of $77.34 spoils the recovery.

WTI Crude Oil daily chart

• Gold struggles as higher energy prices keep inflation concerns alive despite soft US CPI and PPI data.
• Restrictive Fed policy and the possibility of a rate hike later this year limit demand for bullion.
• XAU/USD holds a bearish technical bias below key moving averages.

Gold (XAU/USD) edges lower on Thursday as traders look past back-to-back, softer-than-expected US inflation reports and remain focused on renewed Middle East tensions, which are fueling concerns that higher energy prices could reignite inflationary pressure.

At the time of writing, XAU/USD trades around $4,015, down 1.10% on the day after hitting $3,974 earlier in the American session.

Both the US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for June came in below market expectations. However, Gold failed to benefit as the softer readings merely pushed back expectations of a near-term Federal Reserve (Fed) interest rate hike.

Meanwhile, the US Dollar (USD) and US Treasury yields are staging a modest rebound after two consecutive days of losses, adding to the pressure on Gold.

Fed officials continue to stress the need to bring inflation sustainably back to the 2% target while noting that the labor market appears to have stabilized. This suggests that the central bank could raise interest rates later this year if inflation proves more persistent.

Elevated borrowing costs reduce Gold's appeal as investors seek higher returns from interest-bearing assets. Against this backdrop, Gold retains a downside bias, with sellers eyeing a sustained break below the $4,000 mark.

Data released on Thursday showed US Retail Sales rose 0.2% MoM in June, in line with expectations. May's reading was revised up slightly to 1.0% from 0.9%.

The Retail Sales Control Group also came in as expected at 0.5%, although it was lower than May's 0.8% increase. Initial Jobless Claims fell to 208K from 216K, beating expectations of 217K.

On the geopolitical front, the US carried out a fifth consecutive night of strikes against Iranian targets, while Tehran responded by targeting US assets in Kuwait, Bahrain and Jordan. Reuters reported that Iran had instructed Yemen’s Houthis to close the Bab el-Mandeb gateway to the Red Sea if the US attacks its power network.

Oil prices extended their gains following the report, with West Texas Intermediate (WTI) trading around $80.00, up nearly 12% so far this week.

Technical analysis: Sellers retain control as XAU/USD struggles below $4,200

On the daily chart, XAU/USD keeps a bearish bias as it remains well below the 200-day Simple Moving Average (SMA) at $4,495 and the 100-day SMA at $4,547.

Price is holding within a downward parallel channel, trading beneath its upper boundary around $4,200, while momentum is mixed. The Relative Strength Index (RSI) near 37 leans bearish, while the Moving Average Convergence Divergence (MACD) remains positive, yet with declining histogram bars, hinting that any rebound would still face structural headwinds overhead.

On the topside, immediate resistance is clustered around $4,200, where the horizontal cap and the channel’s upper line converge, before the more significant barriers at the 200-day SMA near $4,495 and the 100-day SMA close to $4,547.

On the downside, initial support appears at the $4,000 horizontal level, with a deeper cushion at the channel floor around $3,800.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Swiss Franc weakens as the US Dollar rebounds from a two-day decline.
• Middle East tensions keep inflation concerns and Fed hike expectations alive.
• The SNB maintains its willingness to counter excessive Franc appreciation.

The Swiss Franc (CHF) weakens against the US Dollar (USD) on Thursday as the Greenback regains its footing following a two-day decline. At the time of writing, USD/CHF trades around 0.8080, up nearly 0.35% on the day, rebounding from an intraday low of 0.8044.

The US Dollar came under selling pressure earlier this week after both the Consumer Price Index (CPI) and Producer Price Index (PPI) reports for June came in below market expectations. The softer inflation figures reduced the chances of an imminent Federal Reserve (Fed) interest rate hike.

However, renewed tensions in the Middle East are driving Oil prices higher again, keeping inflation risks and expectations of a Fed interest rate hike later this year alive.

According to the CME FedWatch Tool, markets are pricing in a 58% chance of a rate hike by September, rising to 65% by October and 76% by December.

The Greenback found additional support from Thursday’s US economic data. Initial Jobless Claims fell to 208K in the week ending July 11. The reading was below the 217K forecast.

US Retail Sales rose 0.2% MoM in June, in line with expectations. May's reading was slightly revised upward to 1.0% from 0.9%. The Retail Sales Control Group also came in as expected at 0.5%, down from May's 0.8% increase.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 100.72 after falling to 100.35 on Wednesday, its lowest level since June 18.

On the Swiss side, the latest summary of the Swiss National Bank's (SNB) June monetary policy decision showed that. Swiss Franc had depreciated somewhat against the US Dollar and the Euro since its March assessment, contributing to easier monetary conditions. Policymakers said current monetary conditions are appropriate and price stability is not at risk.

However, the SNB warned that geopolitical uncertainty could put upward pressure on the Swiss Franc and reiterated its increased willingness to intervene in the foreign exchange market.

• AUD/USD trades slightly higher near 0.7010 as the US Dollar struggles to gain momentum.
• US Initial Jobless Claims fell to 208K, signaling continued resilience in the labor market.
• US Retail Sales growth slowed to 0.2%, while Australian inflation expectations declined to 4.7%.

AUD/USD trades slightly higher near the 0.7010 area on Thursday, extending its recent recovery as the US Dollar (USD) struggles to gain sustained momentum following mixed United States (US) economic data.

US Initial Jobless Claims declined to 208K in the week ending July 11, below expectations of 217K and the previous 216K. The figures suggest that layoffs remain limited and that the US labor market continues to show resilience.

However, US Retail Sales increased only 0.2% MoM in June, matching expectations but slowing sharply from the previous 1.0% rise. The Retail Sales Control Group also grew 0.5%, in line with forecasts but below May’s 0.8% increase. The slowdown in consumer spending limited demand for the Greenback and helped AUD/USD remain above the 0.7000 psychological level.

In Australia, Consumer Inflation Expectations declined to 4.7% in July from 5.5% previously. The fall suggests that household inflation concerns are easing, although it could also reduce pressure on the Reserve Bank of Australia (RBA) to maintain a hawkish monetary-policy stance.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7011, maintaining a bullish near-term tone as it holds above both the 20-period Simple Moving Average (SMA) at 0.6972 and the 100-period SMA at 0.6929. The pair is pressing into overhead supply, with nearby resistance at 0.7013 and a higher cap at 0.7021, while the Relative Strength Index (RSI) hovers just below the overbought threshold around 69.6, hinting that upside momentum is strong but increasingly stretched.

On the downside, initial support is seen at 0.7001, followed by a minor floor at 0.6996 that guards the short-term bullish structure above the 20-period SMA at 0.6972. A deeper pullback would expose the 100-period SMA at 0.6929 as a more significant technical base, while sustained trading above 0.7013 and 0.7021 would open the door for the next leg higher in the broader recovery.

(The technical analysis of this story was written with the help of an AI tool. Know more.)