USDX Stabilizes; Asia Mixed, Tesla, IBM, UNH Dip

The Japanese Yen (JPY) continues to face selling pressure after a weaker-than-expected Tokyo Consumer Price Index (CPI) print. As a result, the USD/JPY pair extended its gains from Thursday into Friday’s Asian session, closing 0.45% higher. This move is primarily fueled by a broadly stronger US Dollar (USD).

The latest Tokyo CPI data for July showed inflationary pressures easing, which may complicate the Bank of Japan's (BoJ) path toward policy normalization. Tokyo’s headline CPI increased by 2.9% year-on-year (YoY) in July, down from 3.1% in June. Core CPI, which excludes fresh food, also rose by 2.9%, slightly below the 3.0% expected by analysts. More importantly, the core CPI also dropped to 2.9% from 3.1% the previous month, suggesting that inflationary pressures in Japan are cooling. Adding to the downward pressure on the Yen, rising political risks following the ruling coalition’s unexpected defeat in the upper house elections may delay the BoJ’s expected rate hikes. This political uncertainty could undermine confidence in the Yen for the second consecutive day. The recent announcement of a US-Japan trade deal has helped reduce economic uncertainty, keeping expectations alive that the BoJ may hike rates later this year.

On the US side, economic data continues to offer mixed signals. Initial Jobless Claims fell to 217,000 for the week ending July 19 signaling a resilient labor market. However, Continuing Claims remained steady at 1.96 million, near the highest levels since 2021. Meanwhile, S&P Global's preliminary PMI data showed a slowdown in the manufacturing sector, while services demand picked up. The Composite PMI, which combines both sectors, rose to 54.6 from 52.9 in June, signaling overall business activity growth.

Despite these mixed signals, the robust labor market continues to support the view that the Federal Reserve will keep interest rates steady in its upcoming meeting.  Looking ahead, the release of US Durable Goods Orders later today will likely be a key focal point for USD price action, with traders eyeing any potential surprises that could affect the Fed’s policy stance.

Gold prices retreated on Thursday, falling over 0.50% following strong US labor market data, despite weaker manufacturing activity as indicated by the S&P Global Flash PMI.

The European Central Bank (ECB) followed the Federal Reserve's lead in keeping rates unchanged amid ongoing uncertainty surrounding the US's contentious trade policies. Despite recent progress in US-Japan trade negotiations, concerns persist over potential tariff hikes with the European Union (EU), Canada, and Mexico, which could push prices higher.

US President Donald Trump is scheduled to visit a Federal Reserve facility undergoing renovations at 20:00 GMT, continuing his vocal criticism of Fed Chair Jerome Powell. Speculation about threats to the Fed's independence could fuel demand for gold, traditionally seen as a safe haven in times of geopolitical tension. In addition to Trump’s visit, traders are also eyeing Friday’s Durable Goods Orders data ahead of the Federal Reserve’s July 29-30 policy meeting.

US Treasury yields rose, with the 10-year note climbing three basis points to 4.416%. As a result, US real yields—the nominal rate adjusted for inflation expectations—jumped nearly three and a half basis points to 2.046%.

The probability of the Federal Reserve holding rates steady at its July 30 meeting is currently at 96%, with just a 4% chance of a 25-basis-point cut. Traders will continue to monitor developments, including Trump’s visit to the Fed and upcoming economic data, to gauge the potential impact on gold prices and broader market sentiment.

Oil prices rose by 1% on Thursday as U.S. crude inventory draws and anticipated cuts to Russian gasoline exports outweighed news that Chevron would receive U.S. approval to resume production in Venezuela.

Crude prices initially fell in early afternoon trading following reports that the Trump administration was preparing to allow Chevron to renew oil operations in Venezuela, an OPEC nation under U.S. sanctions.

Despite the early setback, oil prices rebounded late in the session after news emerged that Russia was planning to reduce gasoline exports to all but a few allied nations, including Mongolia. The move is expected to tighten global supply.

Additional support for oil prices came from a report showing a significant draw in U.S. crude inventories, coupled with hopes of a U.S.-EU trade deal that could reduce tariffs.

On Wednesday, European diplomats revealed that the U.S. and EU were progressing toward a trade deal that might include a 15% baseline tariff on EU imports, with possible exemptions. This deal could pave the way for another significant trade agreement, following the recent deal with Japan, further boosting market sentiment.

The US 500 and US Tech 100 closed at record highs on Thursday, bolstered by strong earnings from Google parent Alphabet, which sparked optimism for other leading artificial intelligence (AI) stocks. However, Tesla took a hit after the electric vehicle maker’s results failed to meet investor expectations.

Alphabet rose almost 1%, as the search giant’s impressive results underscored the success of its heavy investment in AI, boosting confidence in the company’s future growth in this space.

Shares of other tech giants, including Microsoft, Nvidia, and Amazon, also rose continuing the tech sector's strong performance.

Positive developments in U.S.-Japan trade talks, along with signs of progress in negotiations with the European Union, further fueled optimism, driving Wall Street’s gains.

Tesla tumbled 8.27% after CEO Elon Musk warned of a “few rough quarters” due to the U.S. government’s reduced support for electric vehicle makers. The stock has fallen around 25% so far in 2025.

IBM lost nearly 8% after its second-quarter results disappointed investors, particularly due to weak sales in its core software division.

Markets are closely watching Trump’s planned visit to the Federal Reserve headquarters on Thursday, following months of criticism of Fed Chair Jerome Powell’s interest rate policies, which Trump deems too high.

U.S. business activity picked up momentum in July, with companies raising prices on goods and services, leading economists to predict faster inflation in the months ahead, largely driven by rising import tariffs.

With the Fed widely expected to keep rates unchanged at its upcoming meeting, traders are pricing in a 60% chance of a rate cut in September, according to CME’s FedWatch tool.