In July, the US ISM Manufacturing PMI was reported at 48, falling short of the anticipated 49.5. This data point indicates a contraction in the manufacturing sector.
The EUR/USD surged past 1.1550 following weak US employment and PMI figures. Disappointing job data and dollar weakness helped GBP/USD rebound to trade above 1.3250.
Gold And Treasury Yields
Gold climbed to a new weekly high around $3,350, buoyed by a drop in US Treasury bond yields. This movement hints at a reassessment of the Federal Reserve’s rate outlook after underwhelming Nonfarm Payrolls data.
In the cryptocurrency market, July saw a bullish trend with BTC and select altcoins reaching all-time highs. Even so, Bitcoin faced pressure, sliding below $115,000, with bears targeting a $112,000 support level.
In the euro area, there appears to be economic resilience, supported by EU-US agreements and increased German expenditure. While the risks of further cuts exist, they are expected potentially later this year or in early 2026.
The Euro’s Strength
Given the July US manufacturing contraction and soft employment data, we see continued US dollar weakness as the most likely path forward. Initial jobless claims for the week ending July 26, 2025, came in at 245,000, slightly above expectations and reinforcing this weak outlook. For the coming weeks, we should consider strategies that benefit from a falling dollar, such as buying call options on the EUR/USD and GBP/USD.
The euro’s strength is further supported by solid fundamentals within the euro area, especially after Germany’s IFO Business Climate index for July beat forecasts, printing at 91.5. This resilience suggests the EUR/USD climb above 1.1550 has strong backing. We should therefore be cautious with any positions that bet against the euro in the near term.
The drop in US Treasury bond yields is the key driver for markets right now, with the 10-year yield falling below 3.4% for the first time in over a year. This reaction to the underwhelming Nonfarm Payrolls report suggests the market is pricing out further Federal Reserve rate hikes in 2025. We can look to interest rate futures to position for a more dovish Fed stance through the end of the year.
Gold’s rally to $3,350 is a direct result of these lower real yields, making the non-yielding metal more attractive. With inflation staying persistent, the environment is highly favorable for precious metals. We believe holding long positions through gold futures (GC) or buying call spreads on gold ETFs is a prudent move.
We have seen this playbook before, such as during the policy pivot in late 2018 when weakening economic data forced a pause in Fed tightening. The current market action is mirroring that period, rewarding those who positioned for a less aggressive central bank. History suggests this trend of dollar weakness and rising safe-haven assets could persist for several months.
In cryptocurrency markets, the slide in Bitcoin below $115,000 shows that even major assets are not immune to shifting sentiment. Open interest in Bitcoin put options with an $110,000 strike price has increased by over 30% this past week, indicating traders are actively hedging against further declines. While the long-term trend remains bullish, we should use derivatives to protect our crypto portfolios against this short-term bearish pressure.
