US Dollar Falls After Weak Retail Sales Data
The U.S. dollar came under selling pressure on Friday after U.S. retail sales unexpectedly declined 0.6% in July, compared with a 0.2% increase in June.
The weaker consumer spending figures added to recent signs that parts of the U.S. economy may be losing momentum.
The U.S. Dollar Index fell around 0.25% to 99.67, while expectations for another Federal Reserve interest-rate increase in September declined. Markets were pricing roughly a 31% probability of a September rate hike following the latest economic releases.
This creates an important macro theme for forex traders:
weaker economic data → lower rate expectations → pressure on the U.S. dollar.
However, this relationship is not guaranteed. Incoming inflation, employment and Federal Reserve communications can quickly change interest-rate expectations.
EUR/USD Benefits From Dollar Weakness
The euro benefited from the decline in the U.S. dollar, with EUR/USD moving to multi-month highs during Friday's session.
The next phase for EUR/USD is likely to remain sensitive to the difference between U.S. and euro-area monetary-policy expectations.
Forex traders should therefore pay particular attention to:
- U.S. inflation and employment data
- Federal Reserve commentary
- European Central Bank expectations
- U.S. Treasury yields
- geopolitical developments
Rather than looking at EUR/USD movements independently, traders can monitor how expectations for the Federal Reserve and ECB are changing relative to one another.
GBP/USD Supported by Stronger UK Economy
The British pound was another notable performer.
Sterling traded around $1.3521 on Friday and was heading for a weekly gain after stronger-than-expected UK economic data supported the currency.
UK GDP expanded 0.3% in June, helping reinforce expectations of economic resilience. Relatively high short-term UK interest rates have also supported demand for sterling in carry strategies.
The next major focus for GBP traders will include upcoming UK inflation and labour-market data.
These releases could influence expectations surrounding future Bank of England monetary policy and consequently increase volatility in GBP/USD and EUR/GBP.
USD/JPY Remains a Market to Watch
The Japanese yen continues to attract attention following the extraordinary volatility seen earlier this month.
Japan and the United States recently conducted a coordinated yen-buying intervention after the Japanese currency had fallen to extreme multi-decade levels.
On Friday, the yen strengthened slightly as markets considered the possibility of another Bank of Japan interest-rate increase, although it remained on course for a weekly decline.
This means USD/JPY traders currently face several simultaneous drivers:
Bank of Japan policy + Federal Reserve expectations + intervention risk + U.S. yields + geopolitical risk.
Intervention risk is particularly important because currency-market intervention can cause sudden and unusually large price movements.
Gold Market Update: XAU/USD Supported by Weaker Dollar
Gold finished Friday on a stronger footing.
Spot gold rose approximately 0.53% to around $4,374 per ounce, while U.S. gold futures settled around $4,437.
Earlier in the week, gold had reacted positively to U.S. inflation data. Spot gold briefly moved above $4,438 following July CPI figures, with annual core inflation reported at 2.5%.
Friday's softer dollar provided additional support.
The relationship matters because gold is primarily priced internationally in U.S. dollars. A weaker dollar can make gold comparatively less expensive for holders of other currencies, although many other factors also influence XAU/USD.
What's Driving Gold Right Now?
Three themes currently stand out.
1. Federal Reserve expectations
Softer U.S. inflation and economic data have reduced expectations for another near-term rate increase.
Lower interest-rate expectations can be supportive for non-yielding assets such as gold.
2. US Dollar Movement
Dollar weakness helped support bullion during Friday's session. Spot gold gained around 0.6% during part of the U.S. trading session.
3. Geopolitical Risk
Continued Middle East uncertainty remains another potential source of safe-haven demand.
This combination makes XAU/USD particularly sensitive to incoming U.S. economic releases.
Crude Oil Rises as Middle East Supply Risks Return
Energy markets were one of the biggest stories heading into the weekend.
Crude oil prices rose by more than $1 per barrel on Friday as uncertainty surrounding U.S.-Iran relations increased concerns about energy supplies and regional stability.
Oil markets were heading toward a weekly gain as geopolitical developments increased uncertainty around supply routes and the Strait of Hormuz.
For traders, this matters beyond simply WTI and Brent.
A sustained increase in oil prices can influence:
inflation → interest-rate expectations → currencies → gold → global equities.
This makes energy prices an important macroeconomic indicator even for traders who primarily trade forex or precious metals.
Copper Faces Fresh Pressure
Copper also deserves attention.
London-listed mining stocks declined on Friday alongside weaker copper prices, contributing to losses in the UK's FTSE 100.
At the same time, the longer-term supply picture remains complicated.
Major copper producer Antofagasta recently reduced its 2026 production guidance to 625,000–655,000 metric tons, following disruptions at its Los Pelambres operation.
Copper has also been reacting to developments in the Democratic Republic of Congo after restrictions involving copper and cobalt concentrate exports created additional supply uncertainty.
Copper is therefore being influenced by competing factors:
Global growth expectations
vs.
Supply constraints
This makes the metal an important indicator of both industrial demand and global economic sentiment.
What Traders Should Watch Next Week
The coming trading week could remain active across forex and commodities.
For USD pairs, attention will remain on U.S. economic data and changing Federal Reserve expectations.
For XAU/USD, traders should watch the dollar, Treasury yields, Federal Reserve expectations and geopolitical developments.
For GBP/USD, upcoming UK inflation and labour-market releases could influence Bank of England expectations.
For USD/JPY, Bank of Japan expectations and the possibility of further currency intervention remain significant risks.
For oil, developments involving Iran and the Strait of Hormuz could continue to create volatility.
Gold traders will also be looking toward upcoming Federal Reserve minutes, housing data and PMI releases for potential direction.
The Bigger Market Picture
The key theme heading into the new week is the interaction between economic slowdown concerns, interest rates, and geopolitical risk.
Recent U.S. economic data have reduced expectations for further Federal Reserve tightening, putting pressure on the dollar and providing support to gold.
At the same time, Middle East tensions are supporting crude oil prices and creating another potential inflation risk.
That leaves markets facing two competing forces:
Softer economic data → potentially less restrictive monetary policy
while
Higher energy prices → potentially renewed inflation pressure.
How this balance develops could influence USD pairs, XAU/USD, oil, and broader financial markets during the coming sessions.
Risk Disclaimer
This market update is provided for educational and informational purposes only and should not be considered investment advice, trading advice or a recommendation to buy or sell any financial instrument. Forex, CFDs and commodities involve significant risk, and market conditions can change rapidly.
