The S&P Global Manufacturing PMI for Canada stands at 46.1 for July, compared to 45.6 previously. This index value indicates ongoing challenges within the Canadian manufacturing sector.
The EUR/USD pair has climbed above 1.1550 following disappointing US non-farm payroll and ISM Manufacturing PMI data, pushing the US Dollar lower. Simultaneously, GBP/USD has moved above 1.3250 after a prolonged period of losses, aided by a weakened USD amidst poor US employment data.
Gold Prices Surge
Gold prices have reached a weekly high nearing $3,350, benefitting from a fall in US Treasury bond yields. This shift comes as markets adjust outlooks on the Federal Reserve’s rate decisions following weaker US economic indicators.
In cryptocurrency, despite a bullish trajectory in July, Bitcoin has experienced a dip, falling below $115,000. This decrease is attributed to increased market sell-offs, with concerns looming over potential further declines.
In the euro area, economic resilience has been observed due to the EU-US deal and German spending increases. However, a final rate cut remains a possibility, contingent on wage indicators’ performance.
Given the weak US jobs and manufacturing numbers from July 2025, we believe the US Dollar will remain under pressure. This follows a pattern where surprisingly poor data, like the significant non-farm payroll miss back in May of 2021, often leads to a sustained period of dollar weakness. Therefore, we would consider using options to bet against the dollar in the coming weeks.
Trading Strategies
We see the move in EUR/USD above 1.1550 and GBP/USD above 1.3250 as significant breakouts fueled by this dollar decline. To capitalize on this, we are looking at buying call options on both pairs to ride the upward momentum. However, we are mindful that any talk from the European Central Bank about a final rate cut could limit the Euro’s potential gains.
The drop in US Treasury yields makes gold very attractive, and we expect its price to challenge the $3,350 level again. This environment is reminiscent of the early 2020s, when low interest rates pushed gold to then-record highs. We feel that buying gold futures or call options is a clear trade as long as markets expect the Federal Reserve to stay on hold.
Despite broad market optimism, we are becoming cautious on Bitcoin after its drop below the key $115,000 level. This dip looks like profit-taking, similar to the sharp pullbacks we saw during the 2021 bull market, which often preceded deeper corrections. We might consider buying put options to hedge against the risk of further sell-offs.
Canada’s manufacturing PMI, while slightly better, still shows a sector in contraction at 46.1, a figure not far from the levels seen in mid-2024 that signaled economic slowing. This underlying weakness in the Canadian economy makes its currency vulnerable, especially against a strengthening Euro. We would avoid being long the Canadian dollar and may look for opportunities to short it against the Euro.
