The euro declined at the open of European markets on Friday against a basket of global currencies, extending losses for a second consecutive session versus the US dollar and retreating from its two-week high as profit-taking and technical corrections persist.

Despite the drop, the single European currency remains on track for a weekly gain, buoyed by the hawkish tone of the European Central Bank’s latest meeting, during which it paused its monetary easing cycle.

This decision came amid ongoing uncertainty over the potential impact of higher US tariffs on economic activity in Europe, adding to doubts over the likelihood of a rate cut in September.

The Price

• EUR/USD fell 0.1% to $1.1734 as of today’s session open at $1.17477, after recording a high of $1.1759.

• On Thursday, the euro lost 0.2% — its first decline in five sessions — after hitting a two-week high of $1.1775 earlier in the day, with the dip attributed to correction and profit-taking.

Weekly Performance

Over the course of the week — set to conclude with Friday’s close — the euro is up approximately 0.95% against the dollar, on track to post its first weekly gain in three weeks.

European Central Bank

As expected, the ECB left its key interest rates unchanged on Thursday at 2.15%, maintaining the lowest level since October 2022 after seven consecutive rate cuts in previous meetings.

The central bank opted for a pause in its monetary easing, awaiting clarity on future US-EU trade relations. The European Commission stated that a negotiated solution is within reach ahead of the August 1 deadline.

The ECB noted that inflation is currently stable around 2%, aligning with its medium-term target. Incoming economic data, it said, remains broadly consistent with its prior inflation outlook.

Given today’s exceptional uncertainty, the ECB affirmed it would reassess economic and financial conditions at each meeting to determine the appropriate monetary stance.

Christine Lagarde

ECB President Christine Lagarde stated on Thursday: “Following today’s meeting, we can say we are in a wait-and-see mode.” She added that the eurozone economy has shown resilience despite global economic uncertainty.

Lagarde stressed that the ECB’s decisions are data-dependent and reaffirmed the commitment to achieving the 2% inflation target over the medium term. She also reiterated that the bank will follow a “meeting-by-meeting” approach with no preset interest rate path.

September Rate Expectations

• According to Reuters sources, a clear majority within the ECB favored keeping rates unchanged again in September — marking a second consecutive pause.

• Money market pricing for a 25-basis-point ECB rate cut in September has dropped from 50% to below 30%.

The Japanese yen declined on Friday during Asian trading against a basket of major and minor currencies, extending losses for a second consecutive session versus the US dollar and pulling away from its two-week high, as correction and profit-taking pressures persist.

This retreat follows data showing a slowdown in core inflation in Tokyo, easing price pressures on policymakers and reducing the likelihood of a rate hike by the Bank of Japan in next week's meeting.

Despite the decline, the yen remains on track to post a weekly gain amid ongoing political uncertainty in Japan, especially after the ruling party’s defeat in the upper house elections.

The Price

• USD/JPY rose by 0.35% to ¥147.49 as of today’s session open at ¥146.99, marking a low of ¥146.94.

• On Thursday, the yen fell 0.35% against the dollar — its first loss in four days — following correction-driven selling after touching a two-week high of ¥145.85 earlier in the session.

Tokyo Core Inflation Slows

Data released Friday showed Tokyo’s core consumer price index rose by 2.9% in July — the slowest pace since March — below market expectations of a 3.0% rise and down from 3.1% in June.

This deceleration significantly reduces inflationary pressure on the Bank of Japan, diminishing the likelihood of further rate hikes this year.

BOJ Rate Outlook

• Following the data, market pricing for a 25-basis-point rate hike by the BOJ in next week’s meeting dropped from 35% to below 20%.

• Deputy Governor Shinichi Uchida stated that the trade deal signed with Washington on Tuesday reduced economic uncertainty in Japan.

• His remarks fueled market optimism over the potential for resumed rate hikes later this year in the world’s fourth-largest economy.

Weekly Performance

As of the final day of the week, the yen is up approximately 0.9% against the dollar, poised to record its first weekly gain in three weeks.

Political Developments

Japanese Prime Minister Shigeru Ishiba denied reports of a pending resignation following a landslide electoral defeat for the ruling party.

“I shared a strong sense of crisis with former prime ministers, but I have not discussed resignation at all,” Ishiba stated.

Analyst Commentary

• Carol Kong, currency strategist at Commonwealth Bank of Australia, said: “The yen will continue to face headwinds amid lingering political uncertainty.”

• “We still don’t know what Prime Minister Ishiba plans to do… so there's ongoing ambiguity regarding fiscal outlook and BOJ policy,” she added.

Major US-Japan Trade Deal

On Tuesday, US President Donald Trump announced the signing of a “massive” trade agreement with Japan, featuring reciprocal 15% tariffs on Japanese exports to the US and a reduction in auto tariffs from 25% to 15%.

In a Truth Social post, Trump called the deal “perhaps the largest ever,” noting Japan will invest $550 billion in the US, while America will secure 90% of the profits.

The deal includes opening Japanese markets to US exports — particularly autos, trucks, rice, and other agricultural products — which Trump claimed will create “hundreds of thousands of jobs.”

Prime Minister Ishiba confirmed the reduction of US auto tariffs to 15%, describing it as a crucial step given the automotive sector’s dominant role in Japanese exports to the US, accounting for 28.3% of shipments in 2024.

Japan’s auto exports (including cars, buses, and trucks) to the US fell by 26.7% in June after a 24.7% decline in May.

Total exports to the US — Japan’s second-largest trading partner — amounted to ¥10.3 trillion ($70.34 billion) from January to June, down 0.8% year-on-year.

Most major cryptocurrencies climbed on Thursday, supported by improving risk sentiment following positive developments in global trade talks involving the United States.

Trade tensions eased after the US and Japan reached a tariff agreement, alongside encouraging signals of progress in negotiations between the US and the European Union.

Adding to market focus, President Donald Trump announced plans to visit the Federal Reserve later today — a rare and confrontational move in his ongoing pressure campaign against Fed Chair Jerome Powell. This would be the first visit of its kind by a sitting US president in nearly two decades.

Meanwhile, a private survey by S&P Global revealed a notable pickup in US business activity. The composite PMI rose to 54.6 in July’s preliminary reading from 52.9 in June — the highest level in seven months. The services PMI also jumped to 55.2 from 52.9, while the manufacturing PMI fell to 51.2 from 53.1, signaling slower output growth.

In labor data, the US Department of Labor reported that jobless claims remained low, with initial unemployment claims falling to 217,000 for the week ending July 19 — a drop of 4,000 from the previous week and better than expectations of 227,000.

Ethereum

As of 20:51 GMT, Ethereum (ETH) was up 3.9% on CoinMarketCap, trading at $3,746.1.

The Canadian dollar declined against most major currencies on Thursday, following the release of disappointing economic data.

Official figures revealed that Canada’s retail sales index fell by 1.1% in May, surpassing analysts’ expectations of a 0.9% decline.

Excluding volatile components such as energy and food, core retail sales dropped by 0.2%, in line with market forecasts.

As of 19:58 GMT, the Canadian dollar had fallen 0.3% against its US counterpart, trading at 0.7330.

Australian Dollar 

The Australian dollar remained stable against the US dollar, trading at 0.6601 as of 19:59 GMT.

Government data showed that Australia’s manufacturing PMI rose to 51.6, while the services PMI climbed to 53.8.

US Dollar 

The US dollar index rose by 0.2% to 97.3 at 19:42 GMT, reaching an intraday high of 97.5 and a low of 97.1.

President Donald Trump announced plans to visit the Federal Reserve headquarters later today, escalating his pressure campaign on Fed Chair Jerome Powell. The visit would mark the first by a sitting US president to the central bank in nearly two decades.

Meanwhile, a private survey by S&P Global showed that the US composite PMI for output rose to 54.6 in July’s preliminary reading from 52.9 in June, marking a seven-month high.

The services PMI increased to 55.2 from 52.9, while the manufacturing PMI declined to 51.2 from 53.1, signaling a slowdown in production.