July’s highlights in markets: some strength for the dollar and a bounce by gold

July was an unusually active month in many markets relative to the seasonal norm, with various major instruments, especially gold and the dollar, moving quite strongly. This article summarises some of the most important drivers from economic data and sentiment on monetary policy last month then looks briefly at the charts of XAUUSD, GBPUSD and BTCUSD.

American inflation on the rise again

15 July’s American inflation was an important release which showed that the annual headline rate in June reached its highest since February at 2.7%:

This move up by inflation was in line with the consensus, but the annual core figure at 2.9% was slightly below expectations. Instinctively, traders might point to tariffs as being the reason for the increase, but breaking down the data this doesn’t seem to be the case. The biggest increases for specific products were food, transport and used vehicles, which shouldn’t be affected directly and strongly by higher tariffs.

July’s inflation data might suggest that more upward pressure on inflation is to come in the next few months, which would make it harder for the Federal Reserve (‘the Fed’) to proceed with the expected two cuts in the rest of the year. The figures for July will be released on 12 August; these are particularly important for the direction of gold and the US dollar in the medium term ahead of the Fed’s meeting in September.

Shifting sentiment on the Fed’s next cut

In the aftermath of July’s higher figures for inflation, the probability of the Fed cutting in September according to CME FedWatch declined somewhat:

A single cut to 4-4.25% for the funds rate on 17 September remains the probable scenario but not by much. For a period shortly after the latest American inflation, the difference in probability between hold and single cut was less than 10%. Given forward guidance for most of 2025 so far and the Fed’s actions last year, the base case still seems to be possible delays to expected cuts. The Fed’s reduced dovishness in itself is positive for the dollar and negative for gold, but these instruments’ movements also depend on data, politics (especially trade) and overall sentiment.

Political news moves away from tariffs

The focus of the media recently has shifted significantly away from trade wars and onto domestic American politics. Markets are still clearly aware of and counting down to the deadline of 1 August for implementation of a new round of tariffs. However, based on the government’s consistently poor policy discipline (now also known as ‘TACO’, ‘Trump always chickens out’), it’s questionable whether and to what extent new tariffs will apply. Notably, a trade deal was reached between the USA and Japan early on 23 July while there seems to have been considerable progress in other negotiations as well.

Instead, the news recently has been dominated by Israeli bombing of Gaza, Donald Trump’s relationship with Jeffrey Epstein, the tactics of American immigration enforcement and, importantly for markets, the possible replacement of Jerome Powell as chairman of the Fed. This isn’t a new development but a renewed focus on Donald Trump’s periodic demands that rates be cut.

Early in July, Mr Trump took to social media as he often likes to do and called Dr Powell ‘very dumb’ and a ‘major loser’, urging that rates be cut ‘by a lot’. That would be fairly likely to trigger a sustained resurgence of inflation and spook most participants in American markets, but these factors don’t seem to have occurred to Mr Trump.

Dr Powell’s current four-year term expires in May 2026 and speculation on his possible replacement has increased recently. Mr Trump walked back his earlier comments in the middle of July and said that he wouldn’t try to replace the Fed’s chair before his term ends except in the event of fraud. Regardless whether Dr Powell is replaced and who his replacement might be, political pressure on the Fed to cut rates is likely to remain high for some time.

Aggressive movements in crypto markets

New American legislation on cryptocurrencies and news that Trump Media significantly expanded its holdings of bitcoin in July pushed the price of the leading cryptocurrency to fresh all-time highs, with spot CFDs on BTCUSD reaching above $123,000 on 14 July. Expectations that the Fed will continue to cut rates have made various mainstream media frenzied about the purported connection between political intrigue into the Fed and bitcoin’s potential to continue upward.

However, the core narrative of companies buying more bitcoins and, to a lesser extent, Ether and other altcoins is familiar. Net flows into ETFs of bitcoin were very high for much of July but lower on average than in early April or November-early December 2024. A key here is understanding that at least some of bitcoin’s recently greater strength against the dollar is actually the dollar’s weakness: in 2025, the dollar had its worst overall performance in the first half of a year since 1973.

New highs for gold seem questionable for now

Gold gained around 21 July as participants continued to focus on trade negotiations but the sequence of deals on 23 July challenged the narrative of rising trade tension somewhat. The base case of two more cuts this year by the Fed is broadly positive for the yellow metal but now there’s some intrigue about whether the Fed might even hold in September.

The record high daily close is about $3,450 and the main technical reference for now. A close above this area might indicate a false breakout rather than a new phase of the uptrend. However, if the price manages to close above intraday highs near $3,500, the signal of a continuation upward would probably be more reliable. The stochastic signals overbought and volume is relatively low, a normal situation for summer, so an immediate new high seems quite questionable or at the very least it’s a big risk for new buyers to enter here.

The main dynamic support in the near future is probably the value area between the 20 and 100 SMAs and perhaps specifically around $3,300. Volume might pick up around there and drive another attempt on the all-time highs.

Cable’s bounce seems strong

Risk appetite overall improved near the end of June as a series of countries including Japan signed new trade deals with the USA. Recent British data, primarily on inflation, suggest that the Bank of England will continue to be cautious about cutting rates, possibly more so than the Fed. However, the British government’s budget deficit and increased borrowing are negative factors, suggesting that taxes will probably need to be hiked later in the year, which would hit growth.

The bounce appeared to gain momentum around 21 July after an upward crossover of the slow stochastic within the trigger zone and, relatively speaking, higher volume. The combination of these factors would normally suggest a more reliable buy signal but recent highs around $1.375 would probably be very challenging to break.

The 20 SMA is in the process of death crossing the 50 SMA from Bands, so it might also be hard for the price to continue clearly above $1.354 in the immediate future. A retest of the likely support around $1.335 is possible if there’s a significant shift in data, notably jobs and inflation from both countries, or if focus returns to trade tension, but the 100 SMA is likely to be a dynamic support before that.

New highs for bitcoin but momentum lower

Generally lower trade tension, ongoing expectations of two more cuts by the Fed this year and speculation about Jerome Powell’s possible replacement have been some of the main macro fundamental factors driving bitcoin recently. Sentiment in crypto markets generally is greedy but liquidity and volatility have been more limited. So far this movement starting in early July has been much more limited in scope compared to the frantic gains late in 2024.

The very obvious candidate for medium-term resistance would be the 161.8% weekly Fibonacci extension slightly below $140,000. It’s practically certain that the price will reach there sooner or later, but the challenge for traders of CFDs on bitcoin is how long that’s going to take and how far the price might retrace lower before then. Currently there’s no overbought signal from either Bollinger Bands (50) or the slow stochastic, but saturation generally isn’t a useful signal for cryptocurrencies anyway.

In the absence of any evidence of significant profit-taking after $120,000 was reached and amid seemingly high buying demand with an ongoing media frenzy, the price is likely to make a new high again soon unless fundamentals and sentiment shift dramatically. Timing the trade though is potentially very difficult.