Insights 
VT 
US crude oil stocks declined by 3.859 million barrels for the week ending 11 July. This drop was more than the expected decrease of 1.8 million barrels.
AUD/USD saw recovery beyond the 0.6500 mark after the US Dollar’s decline. A sharp change in US monetary dynamics contributed to this shift.
Market Impacts on Usd and Eur
EUR/USD improved as the dollar’s pressure eased temporarily. Market participants are now focusing on upcoming US Retail Sales data and labour market figures.
Gold increased to three-week highs around $3,380 per troy ounce, aided by the dollar’s fall. This movement followed political and economic tensions impacting the dollar.
Australia is projected to have added 20,000 jobs in June, contrasting May’s loss of 2,500 positions. The Australian Bureau of Statistics will release these figures shortly.
China’s GDP expanded by 5.2% year-on-year in the second quarter, supported by trade and industry. However, slowdowns in investment and retail sales, coupled with falling property prices, remain concerns.
Opportunities and Strategies
We see the dollar’s decline as the central theme for the coming weeks, presenting opportunities in currencies and commodities. Recent US Consumer Price Index data for June showed inflation cooling to 3.0%, below expectations and reinforcing the view that the Federal Reserve may be closer to easing policy. This fundamental shift makes us consider strategies that will benefit from continued dollar weakness.
Given the AUD/USD recovery, we believe there is further upside potential, especially after the latest jobs data. The Australian Bureau of Statistics confirmed the economy added a strong 39,700 jobs in June, crushing the forecast and signaling domestic economic resilience. We will also monitor the EUR/USD, as upcoming US Retail Sales and labour market figures will be key drivers of volatility.
The increase in gold to three-week highs around $2,380 per troy ounce is a direct response to the market dynamics. Historically, periods of dollar weakness and falling real yields have consistently provided a strong tailwind for the precious metal. We anticipate call options on gold will perform well if geopolitical tensions and a softer dollar persist.
The significant drop in US crude oil stocks points to firming demand, which should support energy prices. This larger-than-expected draw supports taking bullish positions, such as buying call options on WTI futures. This demand signal is occurring while OPEC+ continues to maintain its production cuts, creating a constructive backdrop for prices.
While China’s headline GDP growth appears strong, we are cautious due to the underlying slowdown in investment and retail sales. This could create headwinds for commodity-linked currencies, including the Australian dollar, if Chinese domestic demand continues to falter. Therefore, holding some protective put options on Australian assets could be a prudent hedge.
