Dollar Rises on Fed News; Crypto and Japan Stocks Up

The euro’s advance stalled on Thursday, with EUR/USD capped beneath the 1.1700 mark as the US dollar firmed on speculation over the next Federal Reserve Chair. The White House is reportedly favoring current Fed Governor Christopher Waller to succeed Jerome Powell, valuing his forecast-driven policy stance and deep institutional knowledge.

According to Bloomberg, Trump advisers “are impressed with Waller’s willingness to move on policy based on forecasting, rather than current data, and his deep knowledge of the Fed system,” citing sources familiar with the matter. Waller, who dissented at last week’s FOMC meeting with a more dovish tilt, recently warned that the labor market was showing early signs of strain—a view bolstered by downward revisions to May and June employment data and reinforced by Thursday’s jobless claims report.

Economic releases from Washington revealed that Initial Jobless Claims rose to 228,000 for the week ending August 2, above both forecasts of 221,000 and the prior week’s 218,000. More notably, Continuing Claims climbed to 1.97 million—the highest since November 2021—raising concerns about a potential stagflationary environment as labor market softness coincides with elevated prices.

Across Europe, Germany’s industrial production fell for a third consecutive month—down 1.6% in April, 0.1% in May, and 1.9% in June—hitting its lowest level since April 2010, excluding the pandemic-related plunge in March 2020. The figures underscore the persistent challenges facing the eurozone’s largest economy.

Investors now turn their attention to upcoming speeches from Fed officials and the release of the University of Michigan’s August Consumer Sentiment Index and inflation expectations, which could provide further clues on policy direction.

Gold prices climbed to their highest level in more than two weeks on Thursday, supported by safe-haven demand following the implementation of new US tariffs and signs of cooling in the labor market.

Ongoing trade tensions and heightened geopolitical risks continue to underpin safe-haven interest in the market. President Donald Trump’s latest round of higher tariffs on imports from several countries took effect Thursday, prompting swift reactions from trade partners including Switzerland, Brazil, and India as they sought to secure more favorable terms. Adding to geopolitical tensions, Israeli Prime Minister Benjamin Netanyahu announced plans for Israel to assume full military control over Gaza.

Markets are now pricing in a 91% probability of a 25-basis-point cut in September, according to CME Group’s FedWatch Tool. Lower rates tend to boost gold’s appeal by reducing the opportunity cost of holding non-yielding assets.

Fed Governor Christopher Waller has emerged as a leading contender to replace Jerome Powell as Fed Chair, Bloomberg reported, as Trump continues to criticize Powell for not cutting rates sooner.

Crude oil prices extended their losing streak to a sixth consecutive session on Thursday, pressured by expectations of a potential diplomatic breakthrough in the war in Ukraine after the Kremlin confirmed Russian President Vladimir Putin will meet US President Donald Trump in the coming days.

Kremlin aide Yuri Ushakov confirmed the leaders’ first summit since 2021 could take place within days, echoing earlier White House signals that a meeting might happen as soon as next week.

Despite the prospect of talks, Washington is preparing secondary sanctions on major buyers of Russian energy to increase pressure on Moscow. Russia remains the world’s second-largest oil producer after the US.

Trade tensions also escalated, with Trump imposing an additional 25% tariff on Indian goods effective August 28, citing India’s continued imports of Russian oil. India, the second-largest buyer of Russian crude after China, could face further trade action, with Trump also warning of possible tariffs on Chinese goods.

On Sunday, OPEC+—which includes Russia—agreed to raise September output by 547,000 barrels per day. However, Thursday’s losses were partly offset by bullish supply data: US crude inventories fell by 3 million barrels last week to 423.7 million, according to the Energy Information Administration, well above the forecast draw of 591,000 barrels.

Other supportive factors included Saudi Arabia’s second consecutive monthly price hike for Asian crude buyers and strong Chinese crude import figures.

US stocks closed mixed on Thursday, with the US 500 slipping marginally after recovering from deeper losses late in the session. Investors weighed reports of potential leadership changes at the Federal Reserve against continued strength in technology shares.

Apple extended gains after announcing plans to invest an additional $100 billion in US manufacturing over the next four years, bringing its total domestic commitment to roughly $600 billion. The pledge was viewed as both a show of alignment with the Trump administration and a strategic step in response to rising trade tensions.

Earnings season approached its final stretch with more than 80% of companies so far topping expectations.

Labor market data added to the cautious sentiment. Initial jobless claims rose to 226,000 for the week ending August 2, while continuing claims climbed to 1.974 million—the highest since November 2021—exceeding expectations of 1.950 million. The data followed last week’s weaker payrolls report and reinforced expectations that the Federal Reserve will cut interest rates next month. According to the CME FedWatch Tool, traders are now pricing in a 94% probability of a 25-basis-point reduction in September, up sharply from 48% a week earlier, with markets anticipating about 60.5 basis points of easing in total for the year.