News

The dollar is weakening against a backdrop of market interventions and risk appetite, whilst Brent is falling on hopes of a deal over Iran and the Strait of Hormuz. However, a breakdown in negotiations could trigger a price rise.

The rise to 52.0 signals a modest but genuine improvement in Australian manufacturing conditions, with production and new orders both returning to growth for the first time in several months, a mildly positive read for domestic industrial activity and employment data in the near term. However, the recovery remains fragile: input cost inflation, though easing, is still running well above pre-conflict levels, with 40% of firms reporting higher costs tied directly to Middle East-driven fuel and shipping expenses. That keeps upside risk in play for producer price inflation readings, which the RBA will be watching closely alongside any further escalation in the region. The renewed fall in export orders, driven by rising prices and competition, points to a currency and competitiveness headwind that could weigh on trade-exposed sectors even as domestic conditions improve. Overall, the data supports a cautiously constructive read on the industrial economy, but the explicit warning from S&P Global's own economist that the recovery could prove fleeting if Middle East inflationary pressures reassert themselves should temper any strong directional conviction.

Earlier, the latest on Trump's war:

• Reports of Iran firing cruise missile at US oil tanker, also UK Navy reports incident
• Trump claims Hormuz deal done, denuclearisation talks to start tomorrow

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Australian manufacturing is showing tentative signs of life, but the war in the Middle East still has its hand on the inflation dial.

Summary:

• The S&P Global Australia Manufacturing PMI rose to 52.0 in July from 51.5 in June, its fourth straight month above the 50.0 growth threshold and the strongest reading since January
• Output and new orders both returned to growth, with production rising for the first time in six months, though growth rates in both were only marginal
• Employment rose at its fastest pace since January, marking the third consecutive month of staffing expansion, though some hiring was temporary
• New export orders fell again amid rising prices and competition, reversing a slight rise seen the previous month
• Input price inflation eased to its lowest rate since February but remained sharp, with 40% of respondents reporting higher costs, largely tied to fuel and shipping linked to the Middle East conflict
• Backlogs of work fell for a fifteenth straight month, though at the slowest pace in six months, while firms rebuilt input stocks for a second consecutive month

Australia's manufacturing sector returned to output growth in July for the first time in six months, according to the latest S&P Global survey, offering tentative signs of recovery even as firms continued to grapple with elevated costs and supply disruption tied to the war in the Middle East.

The headline seasonally adjusted S&P Global Australia Manufacturing Purchasing Managers' Index rose to 52.0 in July, up from 51.5 in June, marking the fourth consecutive month above the 50.0 no-change threshold and the most pronounced improvement in the sector's health since January. The gain was driven by renewed expansions in both output and new orders as the second half of the year began, with production growth recorded for the first time in six months on the back of the first increase in new orders since February. Growth in both measures was described as only marginal, reflecting still-muted demand and ongoing inflationary pressures.

Job creation was a bright spot, with manufacturers expanding staffing levels for a third consecutive month at the fastest pace since January, although some firms noted that new hires were only on a temporary basis. Backlogs of work decreased for a fifteenth straight month as firms kept on top of workloads, though the pace of depletion was the slowest in six months. Stocks of finished goods edged down modestly, while firms rebuilt input inventories for a second consecutive month, supported by a renewed rise in purchasing activity, the first in three months.

Price and supply pressures, while easing, remained a persistent drag on the sector. Input price inflation slowed markedly to its lowest rate since February, but costs still rose sharply, with 40% of respondents reporting an increase, driven chiefly by higher fuel and shipping costs linked to the Middle East conflict. Output price inflation also slowed, though only slightly, with charges continuing to rise at a much faster pace than before the outbreak of the war. Lead times on input deliveries lengthened again, with sea freight delays frequently cited, though the deterioration in vendor performance was the least pronounced in five months. New export orders fell once more, reversing a slight rise in June, as rising prices and competition for new work weighed on overseas demand.

Andrew Harker, Economics Director at S&P Global Market Intelligence, said the renewed rises in output and new orders provided some reassurance that the sector was recuperating from the downturn triggered by the outbreak of war in the Middle East, but cautioned that the recovery remained only tentative, with growth still marginal amid ongoing price and supply pressures. He added that further deterioration in the Middle East situation left the forward path highly uncertain, warning that the nascent recovery could prove fleeting should inflationary pressures begin to strengthen again in the months ahead. Manufacturers themselves appeared cautiously optimistic, with confidence in the 12-month production outlook improving alongside planned capacity expansions, which rose for a third straight month but remained some way below levels seen before the conflict began.

• US stock pattern continues. Dow up. Nasdaq down
• Crude oil futures settle at $79.26
• Netanyahu: Confirmed to Trump that additional strikes on rehabilitated Iranian nuclear facilities are unavoidable
• Trump-Netanyahu meeting reinforces Iran focus
• US treasury sells $44B of 7-year notes at a high yield of 4.473%
• Middle East mediators see U.S.–Iran deal within reach
• Richmond Fed manufacturing index for July 5 vs 10 estimate
• Conference Board Consumer Confidence for July 90.8 versus 92.3 estimate
• CaseShiller seasonally adjusted YoY housing prices change 1.6% versus 1.3% estimate
• Trump on Fox News: Iran understand it will never have a nuclear weapon
• US advance goods trade balance for June -$101.5 billion versus -$100 billion estimate
• US wholesale inventories for June +0.3% vs +0.4% m/m expected
• ADP weekly NER pulse 15,000 versus 16,500 last week
• The USD Is modestly higher to kickstart the NA trading for July 28. What are the charts saying?
• investingLive European FX news wrap: Oman's proposal on Hormuz strait gets regional backing

Overall, Tuesday's economic data leaned softer than expected, reinforcing the view that the Federal Reserve is likely to remain on hold when it announces its policy decision tomorrow at 2:00 PM ET.

The ADP National Employment Report showed private payrolls increased by just 15,000, below the 16,500 expected, marking the fifth consecutive week of slowing job growth. Wholesale inventories also came in below expectations, while the U.S. trade deficit remained elevated as both imports and exports declined. The Conference Board's Consumer Confidence Index disappointed expectations, with inflation expectations also moving lower, suggesting consumers are becoming less concerned about future price pressures. In addition, the Richmond Fed Manufacturing Index pointed to continued weakness in regional factory activity.

Housing data was one of the brighter spots, with the Case-Shiller Home Price Index exceeding expectations. However, after adjusting for inflation, home prices remain lower than a year ago, underscoring the broader cooling trend in the housing market.

Taken together, the softer economic backdrop helped push Treasury yields lower while reducing expectations that the Fed will need to tighten policy further. Market pricing now implies roughly a 31% chance of another rate hike, down from nearly 40% just a week ago.

U.S. Treasury yields moved lower across the curve:

• 2-year: 4.280%, -4.2 basis points
• 5-year: 4.366%, -3.5 basis points
• 10-year: 4.606%, -3.4 basis points
• 30-year: 5.091%, -3.3 basis points

The U.S. dollar finished mixed in relatively quiet trading ahead of tomorrow's Federal Reserve decision. The greenback posted gains against the Japanese yen, British pound, Swiss franc, and Australian dollar, while slipping modestly versus the euro, Canadian dollar, and New Zealand dollar. Overall, the muted price action reflected a market awaiting guidance from Chair Kevin Warsh following the Fed's policy announcement.

Adding to the positive tone was growing optimism surrounding the Middle East. Around midday, reports surfaced that regional mediators believe the United States and Iran are moving closer to a potential agreement that could revive a previously abandoned memorandum of understanding and help ease regional tensions. Negotiators from Pakistan, Egypt, and Qatar are reportedly working on a framework governing shipping through the Strait of Hormuz, while the White House is expected to wait until after President Trump's meeting with Israeli Prime Minister Benjamin Netanyahu before deciding whether to move forward.

The prospect of reduced geopolitical risk continued to pressure crude oil prices. After trading near $93 per barrel last week, WTI crude fell as low as $77.78 today before recovering modestly. It settled at $79.26, down $3.35 (-4.06%), as traders continued to remove the geopolitical risk premium tied to potential supply disruptions through the Strait of Hormuz.

U.S. equities finished mixed as investors balanced the prospect of easing geopolitical tensions and lower oil prices against continued weakness in technology shares. The Dow led the gains, supported by industrial and value-oriented stocks, while the broader market was held back by another round of selling in AI and semiconductor names.

• Dow Jones Industrial Average: 52,752.28, +537.05 (+1.03%)
• S&P 500: 7,428.77, +15.60 (+0.21%)
• Nasdaq Composite: 24,876.91, -55.17 (-0.22%)
• Russell 2000: 2,953.80, +5.77 (+0.20%)
• Nasdaq-100: 27,763.13, -276.08 (-0.98%)

The market rotation away from mega-cap technology continued, with investors favoring cyclical and value sectors while AI-related stocks remained under pressure.

Looking ahead, the next two days could prove pivotal for financial markets.

Wednesday's earnings calendar is headlined by Microsoft and Meta Platforms, both reporting after the closing bell. Investors will be watching closely for updates on AI monetization, cloud demand, advertising trends, and capital spending after recent weakness in AI-related shares. Earlier in the day, Procter & Gamble will offer another read on consumer spending and pricing trends, while Qualcomm will provide insight into demand across the smartphone and semiconductor markets.

Then on Thursday, Apple and Amazon report, making this one of the busiest and most influential stretches of earnings season.

Before those earnings hit, however, the market's attention will be squarely on the Federal Reserve. The Fed is widely expected to leave interest rates unchanged, making Chair Kevin Warsh's post-meeting press conference the primary focus. Investors will be listening for any indication that cooling inflation and a moderating labor market are bringing the Fed closer to a rate cut later this year, or whether policymakers still believe inflation risks justify keeping rates higher for longer. Any changes to the policy statement, economic projections, or the voting split could have an immediate impact on stocks, Treasury yields, and the U.S. dollar.

No change in EUR/USD’s outlook as it’s still bounded in consolidations from 1.1323. Intraday bias remains neutral. With 1.1499 support turned resistance intact, further decline is expected. On the downside, break of 1.1323 will resume the fall from 1.2081 to 100% projection of 1.2081 to 1.1408 from 1.1848 at 1.1175. However, decisive break of 1.1499 […]

The post EUR/USD Daily Outlook appeared first on ActionForex.

EUR/USD extended the consolidations pattern above 1.1323 last week and outlook is unchanged. Initial bias remains neutral this week, and with 1.1499 support turned resistance intact, further decline is expected. On the downside, break of 1.1323 will resume the fall from 1.2081 to 100% projection of 1.2081 to 1.1408 from 1.1848 at 1.1175. However, decisive […]

The post EUR/USD Weekly Outlook appeared first on ActionForex.