Forex News
- Gold price drifts higher to near $4,110 in Friday’s early Asian session.
- Traders scale back expectations of an immediate Fed rate hike.
- IRGC said it hit Kuwait and Jordan after US strikes.
Gold price (XAU/USD) gains momentum to around $4,110 during the early Asian session on Friday. The precious metal edges higher as traders reduce their bets on interest rate hikes a day after Federal Reserve (Fed) Chair Kevin Warsh offered little clarity on policy.
On Wednesday, the US central bank decided to leave the interest rates unchanged in its current target range between 3.50% and 3.75%. During the press conference, Warsh pledged an unwavering commitment to bring inflation down, a message that left markets confused about just what he was prepared to do.
It’s worth noting that Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Markets are now pricing in nearly a 63.4% probability of a US rate hike in September, down from about 77% before the July Fed meeting, according to the CME FedWatch tool.
Nonetheless, ongoing tensions in the Middle East might cap the upside for the yellow metal as it could push crude oil prices up and prompt central banks to hold rates at elevated levels for longer.
Bloomberg reported the Islamic Revolutionary Guard Corps (IRGC) said that it targeted US bases in Kuwait, Jordan and Bahrain after US forces bombed a building on Iran’s Qeshm Island. Iranian military added that the Strait of Hormuz would remain closed and that the “aggressor will be punished.”
Fed shifts focus to data as forward guidance is pared back
Commerzbank’s FX Research team notes that the Fed chair has reinforced the central bank’s data-dependent stance, “continu[ing] his efforts to reduce the Fed's reliance on forward guidance, arguing that markets should respond to incoming economic data rather than Fed signalling.” This recalibration of communication strategy is seen by Commerzbank as a key backdrop for recent market moves, with investors increasingly attuned to the evolving macro data rather than pre-set policy cues.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- AUD/USD trades above 0.7000 after a 1.06% advance, taking out the 50-day EMA and posting its strongest session in weeks.
- The domestic week was dovish, with a soft second-quarter inflation report pricing an August hike out of the Reserve Bank's curve.
- The Yen gained close to 2% on the Aussie in the same hour, which is the exposure that matters if Tokyo returns for a second round.
AUD/USD trades above 0.7000, up 1.06% and roughly 85 pips clear of a session low set just below 0.6950 in the early European hours. The advance cut through the 50-day Exponential Moving Average (EMA) sitting at 0.7000, a level the pair has been rejected at repeatedly since June. None of it originated in Australia.
A dovish week at home
Australia's second-quarter inflation report on Wednesday undercut what was left of the tightening case. The trimmed mean measure the Reserve Bank of Australia targets printed 3.6% YoY, below the 3.8% the Bank itself forecast in May, and the monthly headline rate eased to 3.8% from 4.0% against a consensus that expected no improvement at all. Markets took the August hike out of the curve within the hour. The Governor had warned only days earlier that a further increase may still be required to return inflation to target, and the curve priced her out anyway.
The activity data pointed the other way and nobody cared. Building permits jumped 7.2% MoM in June against a consensus looking for a 1.5% decline, and the July flash surveys held in expansion with the composite at 52.6. The Aussie sat within 20 pips of 0.6950 through the entire Asian session and then made its low of the day roughly five hours after the permits release.
The move came from Tokyo
The session turned at 13:30 GMT, when USD/JPY collapsed more than five Yen in minutes on suspected Japanese intervention that Tokyo has not confirmed. One trading desk recorded roughly 8.1 billion Dollars of selling in the pair across core venues inside the ten minutes that followed. The Dollar Index fell to a seven-week low near 100, and every Dollar pair on the board went with it.
American data had softened the ground an hour earlier without doing the work. Advance second-quarter Gross Domestic Product (GDP) growth of 1.5% missed a 2.1% consensus and core Personal Consumption Expenditures (PCE) inflation printed 0.1% MoM against 0.2%, which was worth a few tenths of a percent to the Dollar. The five-Yen move was worth the rest, and the Aussie's 1.06% is overwhelmingly the second thing.
The carry problem
The trade the Aussie actually carries is not the one against the Dollar. Australia's cash rate sits at 4.35% against 1.00% in Japan, which makes the Aussie one of the natural longs funded in Yen, and the Yen took close to 2% out of it on Thursday. A currency that gains 1.06% on the Dollar while losing 2% to its own funding currency has not had a good day. It has had a profitable one.
Intervention of this size rarely arrives on its own, and Tokyo has historically worked in multi-day bursts rather than single strikes. A second round would land on the same leveraged positions from the same direction, and the Aussie sits in the middle of them. That exposure is larger than anything the Australian calendar can produce over the next fortnight.
What lands next
Friday opens with Australian producer prices at 01:30 GMT against a 3% previous, alongside the Chinese official manufacturing and non-manufacturing surveys at the same time. Both carry a consensus of exactly 50.0, the line between expansion and contraction, which leaves no room for a comfortable reading in either direction. The Bank of Japan decision and quarterly Outlook Report follow, with a hold at 1.00% expected and the press conference at 06:30 GMT.
Next week thins out at home. The private Chinese manufacturing survey lands Monday and the services equivalent Wednesday, Australian trade figures arrive Thursday against a previous deficit near 3 billion Australian Dollars, and the United States delivers its manufacturing survey Monday, private payrolls Wednesday, and Nonfarm Payrolls Friday against a 57K previous. The Reserve Bank meets on 11 August.
With a September Federal Reserve hike priced at 63% and the Australian central bank now expected to sit still through August, the rate differential is narrowing from both ends. That is the case for reading Thursday's gain as borrowed rather than earned, and for treating 0.7000 as a level the Aussie has been handed rather than one it has taken.
Levels and bias
Resistance: First at 0.7050, immediately above the session high. A daily close above there opens 0.7100, with the May peak short of 0.7300 the ceiling for the year so far.
Support: 0.7000 is the pivot, reinforced by the 50-day EMA at the same level. Below it sits 0.6950, then the 200-day EMA just above 0.6900, which has flattened out and has held every test since early July.
Bias: Bullish while 0.7000 holds, targeting 0.7100. The daily Stochastic Relative Strength Index (Stoch RSI) at 85 says the move is stretched rather than broken, and the genuine risk to it is a second Japanese operation rather than anything scheduled in Canberra. Losing 0.7000 returns the pair to the range it has occupied since June.
AUD/USD daily chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- GBP/USD trades above 1.3450 after a 0.71% advance, cutting through the converged 50-day and 200-day EMAs as though neither was there.
- A 6-3 hold with three votes for an immediate hike beat the expected 7-2 split, and the press conference spent its hour insisting nobody should read a tightening cycle into it.
- A 0.2% gain on the Euro against a 0.71% gain on the Dollar leaves most of this rally the property of a currency knocked over by suspected Japanese intervention.
The Bank of England held Bank Rate at 3.75% for a fifth straight meeting on Thursday, and the Monetary Policy Committee (MPC) got there on a 6-3 vote, with three members backing an immediate quarter-point increase against a consensus that had looked for 7-2. GBP/USD trades above 1.3450, up 0.71%, roughly 130 pips above the European morning low short of 1.3350. The advance cut straight through the 50-day and 200-day Exponential Moving Averages (EMA), which have converged just below 1.3400 and have been advertising a range rather than defending one.
A hawkish vote and an hour spent undoing it
The dissent bloc grew by one from June, and the swing factor is not in dispute. Energy prices remain volatile and well above pre-conflict levels, June's Consumer Price Index (CPI) reading of 2.6% is expected to turn higher as those costs pass through, and the dissenters argue that the longer the shock persists, the greater the risk of second-round effects in wage and price setting.
The press conference then spent an hour undoing the impression the vote had just created, with the Governor telling reporters directly that nothing the committee had said should be read as the Bank edging toward a hike. The majority guidance restates the June framework: tolerate a slower return to target rather than tighten into an external shock, and wait for hard evidence that energy costs are feeding domestic inflation. One dissenter's stated trigger was narrower, resting on the failure of last month's peace framework and the energy volatility that followed.
What the Euro cross gives away
The most useful information Thursday has produced sits on a different pair entirely. Sterling is up roughly 0.2% against the Euro, against 0.71% on the Dollar, and the gain on the cross arrived late, well after the vote. Through the decision and the press conference the Pound was softer against the Euro, at its weakest of the day. A genuine repricing of Britain's rate path would have bought more than 20 pips against a central bank that did nothing at all.
The Dollar side is where this session was actually decided, and it was decided violently. USD/JPY fell more than 400 pips through 160 on suspected intervention that Tokyo has not confirmed, dragging the Dollar Index down around 0.8% to a seven-week low near 100. The 12:30 GMT data batch was an odd one to trade: advance second-quarter Gross Domestic Product (GDP) growth of 1.5% against 2.1% consensus arrived alongside a GDP price index at 6.3% against 3.6%, a growth miss and an inflation shock in one release. Traders took the growth half, helped by a softer core Personal Consumption Expenditures (PCE) print of 0.1% MoM against 0.2%.
The government Sterling has to carry
The Pound's inability to hold a hawkish surprise against the Euro is not a technical accident. Burnham took office as Prime Minister on 20 July, appointed John Healey to the Treasury, and opened with language about finding flexibility within the inherited fiscal rules. Gilt yields answered immediately, with the 10-year moving above 5% and the 30-year near 5.75%, among the highest in the G7.
That is the difference between a hawkish central bank and a hawkish central bank in a country carrying a funding question. Higher British rates currently read as risk premium rather than yield attraction, and roughly 24 billion Pounds of trailed spending and tax measures ahead of an October Budget keeps that reading intact. Until the Budget resolves that, Sterling will keep converting good news into small gains and bad news into large ones.
What lands next
Friday brings the Employment Cost Index (ECI) for the second quarter at 12:30 GMT, consensus 0.8% against 0.9% previously, then the Chicago Purchasing Managers Index (PMI) at 13:45 GMT and the Michigan sentiment and inflation expectations series at 14:00 GMT. Month-end rebalancing flows land the same day and tend to distort the final hours of a large directional move.
Next week is a United States labour week with nothing of consequence on the British side. The Institute for Supply Management (ISM) manufacturing survey arrives Monday at 14:00 GMT against a 53.3 previous reading, the private payrolls report and the ISM services survey follow on Wednesday, and Nonfarm Payrolls land on Friday at 12:30 GMT against a 57K previous. A regional Federal Reserve president speaks late Thursday.
Futures put a September Federal Reserve hike at 63%, lift that to 90% by the late October meeting, and price one increase in full by December, with a second running near 37% by that date. Add three dissents of its own and a chair who has withdrawn forward guidance entirely, and payrolls carries more weight than usual. GBP/USD is a Dollar instrument until the Bank of England meets again in September, and that is the honest read of a session in which Sterling's own central bank surprised on the hawkish side and the Pound collected 20 pips on the Euro for it.
Levels and bias
Resistance: First at 1.3500, immediately above the session high. A daily close above there opens 1.3550, with the mid-July spike area near 1.3650 the next meaningful obstacle.
Support: 1.3400 is the pivot now, with the converged moving averages sitting between 1.3350 and 1.3400 just beneath it. A break below 1.3400 puts 1.3300 back in play, then 1.3250.
Bias: Bullish while 1.3400 holds, targeting 1.3550. The daily Stochastic Relative Strength Index (Stoch RSI) near 33 leaves room above rather than arguing against the move, though ownership of this rally belongs to the Dollar and not to Sterling. A break back below 1.3400 returns the pair to the range that has contained it since May and to 1.3300.
GBP/USD daily chart
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- USD/CHF falls to ten-day low as intervention speculation hits Dollar.
- Bullish structure holds while price stays above 50-day SMA.
- Break below 0.8010 exposes 0.8000 and deeper SMA supports.
The USD/CHF retreats for the second straight day, down more than 1% amid growing speculation of an intervention in the FX markets, which boosted the Japanese Yen. The pair fell to a 10-day low of 0.8039, slightly above the 50-day Simple Moving Average (SMA) at 0.8027. As of writing, the pair meanders around 0.8250.
USD/CHF Price Forecast: Technical outlook
Despite its retreat, USD/CHF remains upward-biased. The market structure indicates that the uptrend remains intact as long as spot prices are above the 50-day SMA and the July 10 cycle low of 0.8010.
The Relative Strength Index (RSI) turned bearish. Hence, with price action revealing that bulls are still in charge, while the RSI is bearish, caution is warranted.
For a bullish resumption, USD/CHF needs to clear 0.8100. Above this area lies the high of the day (HOD) at 0.8175, ahead of 0.8200. If price registers a decisive break, the yearly high of 0.8207 might be up for grabs.
Downwards, a breach below the 50-day SMA and 0.8010 opens the door to a break of 0.8000. Below, the bullish market structure would be broken, opening the door for further downside. The next support would be the 100-day SMA at 0.7950, followed by the 200-day SMA at 0.7922.
USD/CHF Chart – Daily
Swiss Franc Price This Month
The table below shows the percentage change of Swiss Franc (CHF) against listed major currencies this month. Swiss Franc was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.91% | -1.55% | -1.80% | -1.32% | -1.55% | -3.37% | -0.37% | |
| EUR | 0.91% | -0.61% | -0.92% | -0.45% | -0.62% | -2.53% | 0.55% | |
| GBP | 1.55% | 0.61% | -0.26% | 0.21% | 0.00% | -1.90% | 1.17% | |
| JPY | 1.80% | 0.92% | 0.26% | 0.45% | 0.19% | -1.71% | 1.43% | |
| CAD | 1.32% | 0.45% | -0.21% | -0.45% | -0.26% | -2.13% | 0.98% | |
| AUD | 1.55% | 0.62% | -0.00% | -0.19% | 0.26% | -1.91% | 1.20% | |
| NZD | 3.37% | 2.53% | 1.90% | 1.71% | 2.13% | 1.91% | 3.15% | |
| CHF | 0.37% | -0.55% | -1.17% | -1.43% | -0.98% | -1.20% | -3.15% |
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 Swiss Franc from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CHF (base)/USD (quote).
Here is what you need to know for Friday, July 31:
The US Dollar (USD) falls sharply during the American session on Thursday after United States economic growth missed expectations and underlying inflation moderated. Additional pressure comes from a sudden surge in the Japanese Yen (JPY), which fuels speculation that Japanese authorities intervened in the foreign exchange market.
The US Dollar Index (DXY) declined around 0.8% and trades near 100.00, falling below the psychological 100.00 level. Preliminary US Gross Domestic Product expanded at an annualized rate of 1.5% in the second quarter, below the 2.1% market forecast. Core Personal Consumption Expenditures inflation rose only 0.1% MoM in June, compared with expectations of 0.2%, while the annual rate eased to 3.3% from 3.4%.
US data were not entirely weak, as Initial Jobless Claims came in at 197K, below the expected 200K. The GDP Price Index also surged 6.3%, well above the 3.6% forecast, suggesting that inflationary pressures remain elevated despite slower economic growth.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.52% | -0.71% | -2.36% | -0.27% | -1.04% | -1.39% | -1.05% | |
| EUR | 0.52% | -0.21% | -1.86% | 0.26% | -0.56% | -0.90% | -0.53% | |
| GBP | 0.71% | 0.21% | -1.63% | 0.47% | -0.34% | -0.70% | -0.30% | |
| JPY | 2.36% | 1.86% | 1.63% | 2.14% | 1.36% | 0.98% | 1.39% | |
| CAD | 0.27% | -0.26% | -0.47% | -2.14% | -0.76% | -1.14% | -0.75% | |
| AUD | 1.04% | 0.56% | 0.34% | -1.36% | 0.76% | -0.35% | 0.01% | |
| NZD | 1.39% | 0.90% | 0.70% | -0.98% | 1.14% | 0.35% | 0.42% | |
| CHF | 1.05% | 0.53% | 0.30% | -1.39% | 0.75% | -0.01% | -0.42% |
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).
EUR/USD advances around 0.5% and trades near 1.1530, reaching its highest level in several weeks. Eurozone GDP expanded 0.4% QoQ in the second quarter, twice the expected 0.2%, while annual growth accelerated to 1.0%. Spain led the regional expansion with quarterly growth of 0.7%, while Germany, France and Italy each grew 0.2%. German annual inflation also accelerated to 2.8%, supporting expectations that the European Central Bank will remain cautious about further monetary easing.
GBP/USD rises around 0.8% and trades near 1.3470 after the Bank of England delivered a hawkish hold. The BoE maintained its Bank Rate at 3.75%, but three policymakers voted for a 25-basis-point increase, compared with expectations for two. The 6–3 decision indicated that concerns about persistent inflation remain significant among Monetary Policy Committee members.
USD/JPY plunges around 2.4% and trades near 159.50 as the Japanese Yen strengthens abruptly across the market. The speed and scale of the movement raise speculation that Japan’s Ministry of Finance instructed the Bank of Japan to purchase Yen, although the operation has not been officially confirmed. Investors will closely monitor comments from Japanese authorities ahead of Friday’s BoJ policy announcement.
AUD/USD surges around 1.1% and trades near 0.7030, moving above the 0.7000 psychological level. The Australian Dollar benefits from broad Greenback weakness and improved demand for risk-sensitive currencies following the softer US growth and monthly inflation figures.
West Texas Intermediate (WTI) Oil falls around 0.7% and trades near $84 per barrel. Crude prices struggle to retain their recent gains as concerns about slower US economic growth offset continued geopolitical uncertainty and potential risks to Middle Eastern energy supplies.
Gold rises around 1.1% and trades near $4,113 per troy ounce, supported by the weaker US Dollar and softer core PCE reading. Silver outperforms, gaining almost 3% and climbing toward $59.20 per ounce as demand for precious metals strengthens.
On Friday, the Bank of Japan is expected to keep its interest rate unchanged at 1%. Attention will focus on the Monetary Policy Statement, quarterly Outlook Report and press conference for signals about further rate increases and comments regarding the Yen’s sudden appreciation.
The European calendar will feature preliminary Eurozone inflation data. Core Harmonized Index of Consumer Prices inflation is expected to remain at 2.4% YoY, while headline inflation is forecast to accelerate to 2.9% from 2.8%. Germany will publish unemployment figures, while France and Italy will release preliminary inflation data.
In the United States, the Employment Cost Index is expected to rise 0.8% in the second quarter. Investors will also monitor the Chicago PMI, final Michigan Consumer Sentiment and one-year and five-year consumer inflation expectations. Canada will publish monthly GDP, which is forecast to grow 0.2% in May.
TD Securities’ Senior Asia Economist Alex Loo assesses the July Politburo meeting, noting no major new stimulus despite acknowledged growth challenges. The focus is on fiscal execution, accelerating spending and bond use to support the Six Networks infrastructure program. Loo expects stronger fiscal implementation to lift China’s GDP growth to 4.6% in 2026, with potential off-cycle stimulus if US-China trade tensions escalate.
Politburo signals cautious policy stance
"As we expected, the Politburo (China's top leadership) refrained from announcing any large-scale stimulus plans since growth risks haven't worsened materially."
"The Politburo's focus is squarely on policy execution for H2 2026, especially on fiscal implementation as the Politburo called for an acceleration in the "pace of fiscal spending and bond fund utilization to vigorously promote the construction of key projects and new infrastructure, as well as new social development initiatives"."
"For 2026, the broad budget deficit (combination of official deficit, special local government bond quota, and special sovereign bond) is estimated at CNY11.8tn, similar to 2025. Meeting this full-year target implies another CNY7.2 trillion (5.2% of GDP), which is a substantial fiscal impulse and could boost GDP growth in the second half."
"If authorities manage to ramp up fiscal execution, we expect GDP growth to recover from the 4.3% y/y in Q2, and we expect full-year GDP growth to land at 4.6%, in line with the GDP target range for 2026 at "4.5-5.0%"."
"In this scenario, we would expect China to respond tit-for-tat, and a further escalation would likely prompt a fresh stimulus announcement at the October Politburo Economic meeting in the form of a supplementary budget like in October 2023."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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