Forex today: Dollar extends gains amid tariffs and Middle East tensions, yen and gold fall

The US dollar strengthened significantly, supported by new tariffs and geopolitical concerns, while the yen struggled and gold declined.

Dollar dominance and geopolitical risks

• The US dollar emerged as the strongest major currency, with its bullish momentum fueled by rising geopolitical tensions and solid US labor data.
• US President Donald Trump reportedly imposed new tariffs on numerous trading partners.
• Concurrently, President Trump promised to punish Iran for Houthi attacks in the Red Sea, and the US military reportedly conducted a 13th consecutive night of strikes against Iranian military targets, contributing to safe-haven flows into the dollar.

Yen under pressure, gold retreats

• The Japanese yen struggled today, despite Japan's June national CPI inflation jumping to 1.7% year-on-year from 1.5%.
• The EUR/JPY pair extended its rally, with rumors of an ECB rate hike adding pressure on the yen, reversing yesterday's reported yen rebound.
• Gold fell to near $4,050. This decline occurred as the Middle East conflict reportedly heightened inflation concerns, causing the metal to retreat from its recent safe-haven climb.

Aussie dollar and pound weakness

• On an intraday basis, the Australian dollar was the weakest currency, despite Australian composite PMI rising to 52.6 in July and the manufacturing PMI increasing to 51.7.
• The British pound extended its decline for a sixth session, influenced by the broader strength of the dollar.
• The New Zealand dollar also weakened, reportedly due to strong US labor data reinforcing dollar strength.

Market metrics

• Our sentiment gauge, the FSI, stands at 59 (Neutral). The MRS is at 59, indicating a moderate market readiness, and the CTS remains high at 80.

Key events today

• GBP · Retail Sales m/m: SCHEDULED · forecast -0.3% vs previous 1.2%
• EUR · French Flash Manufacturing PMI: SCHEDULED · forecast 51 vs previous 50.7
• EUR · German Flash Services PMI: SCHEDULED · forecast 49 vs previous 46.8