Dollar Weakens as Gold Rises, Stocks Rebound

EUR/USD trades around 1.1530 during Wednesday’s European session, edging slightly lower as uncertainty over US-Iran negotiations weighs on the Euro and supports safe-haven demand for the US Dollar.

Iran rejected US claims that the Strait of Hormuz would reopen under a new agreement, adding to concerns over efforts to ease regional tensions. An Iranian official said discussions with Oman are aimed at establishing an “intermediate corridor” and are not being conducted with US participation.

Meanwhile, US JOLTS Job Openings fell to 7.359 million in June from 7.537 million in May, coming in below the market expectation of 7.4 million and pointing to some softening in labour-market conditions.

Attention now turns to the US ADP Employment Change and ISM Services PMI due later Wednesday, while Friday’s July Nonfarm Payrolls report will be closely watched for further clues on the strength of the US labour market and the Federal Reserve’s interest-rate outlook.

EUR/USD remains relatively stable around the 1.15 area, with limited fresh catalysts from the Eurozone allowing the pair to consolidate its recent gains.

Gold extends its advance for a second consecutive session, reaching a fresh two-week early on Wednesday. The precious metal continues to attract buyers as fading expectations for aggressive Federal Reserve tightening and a softer US Dollar improve the appeal of bullion.

Recent developments surrounding the Strait of Hormuz have also influenced gold’s price action. While hopes for a diplomatic breakthrough have reduced some of the broader safe-haven demand, the prospect of renewed stability in the region has helped weigh on the US Dollar, providing additional support for Gold.

Despite the latest gains, the outlook remains mixed. Markets continue to price in the possibility of a Fed rate hike later this year, while resilient labour-market conditions could keep monetary policy restrictive for longer. This creates a potential obstacle for gold, particularly if upcoming US data reinforces expectations for higher interest rates.

Attention now turns to Wednesday’s US ADP Employment Change and ISM Services PMI reports, which could influence short-term Dollar and Treasury yield moves. Friday’s Nonfarm Payrolls report will remain the key event for the week, with a weaker-than-expected reading potentially strengthening the case for further gains in Gold.

From a market perspective, XAU/USD has regained strong upside momentum after holding above the $4,100 area, with traders now watching whether the metal can extend its move toward the $4,150 level and sustain its recent recovery.

Oil prices steadied on Wednesday after falling sharply over the previous two sessions, with markets assessing whether diplomatic efforts between the US and Iran could lead to an agreement and the reopening of the Strait of Hormuz.

Qatar said mediators were making progress toward ending the conflict, although Iran has denied US claims that negotiations are already underway. A key issue remains the future of the Strait of Hormuz, with uncertainty over whether Iran would retain any control over the strategic waterway and whether Washington would accept such an arrangement.

The Strait remains critical to global energy markets, with around 20% of the world’s oil and liquefied natural gas previously passing through the waterway. Any progress toward reopening the route could further reduce the geopolitical premium in crude prices.

Meanwhile, US crude and gasoline inventories reportedly increased last week, according to American Petroleum Institute data, while distillate stocks declined. Official inventory figures from the Energy Information Administration are due later Wednesday and could provide another catalyst for oil prices.

US stocks surged on Tuesday, with the US 500 and Dow Jones Industrial Average closing at record highs as strong earnings from AI-related companies reinforced optimism around corporate growth.

Palantir Technologies jumped 29.5% after raising its annual revenue forecast, marking its strongest daily gain since February 2024. Caterpillar also advanced 5.45% after lifting its annual revenue growth outlook, with demand for power-generation and construction equipment benefiting from the expansion of AI data centers.

The Philadelphia Semiconductor Index rose more than 6%, extending its gains for a fourth consecutive session after suffering a sharp decline in July.

Lower crude oil prices provided another boost to market sentiment as hopes for progress toward a US-Iran agreement reduced concerns over energy supply disruptions. Falling oil prices also helped ease pressure on Treasury yields and interest-rate expectations.

Investors now turn to further earnings releases and a series of US labour-market indicators, culminating in Friday’s Nonfarm Payrolls report, for additional clues on economic momentum and the outlook for monetary policy.