Markets turn choppy ahead of the weekend

Here is what you need to know on Friday, August 12:

The risk rally that was fueled by the soft US inflation data mid-week lost its steam and the market action turned choppy ahead of the weekend. The US Dollar Index moves sideways in a narrow channel above 105.00, the 10-year US T-bond yield holds above 2.8% and the US stock index futures post small daily gains following Wall Street’s mixed performance on Thursday. June Industrial Production data will be featured in the European economic docket. Later in the day, investors will pay close attention to the University of Michigan’s preliminary Consumer Sentiment Survey for August. The long-run inflation expectations component of the survey could trigger a market reaction during the American trading hours.

Although the data from the US showed on Thursday that producer inflation rose at a softer pace than expected in July, the greenback managed to stay resilient against its rivals amid a cautious market mood. Meanwhile, San Francisco Fed President Mary Daly told Bloomberg that she has an open mind on the possibility of a 75 basis points rate hike in September.

EUR/USD registered small daily gains on Thursday and seems to have gone into a consolidation slightly above 1.0300 on Friday.

GBP/USD continues to fluctuate in a narrow channel near 1.2200 in the early European morning as investors assess the latest data releases. The UK’s Office for National Statistics reported on Friday that the Gross Domestic Product contracted by 0.1% on a quarterly basis in the second quarter. Moreover, Industrial Production and Manufacturing Production fell by 0.9% and 1.6%, respectively, on a monthly basis in July. 

Gold closed flat on Thursday and stays on the backfoot near $1,790 early Friday with US Treasury bond yields holding steady during the European session. 

USD/JPY staged a rebound after having dropped below 132.00 on Thursday but struggled to gather momentum. The pair clings to modest daily gains as it tries to stretch higher toward 133.50 on Friday.

Rising crude oil prices provide a boost to the commodity-sensitive loonie and USD/CAD continues to push lower toward 1.2700 on Friday. The barrel of West Texas Intermediate is up more than 6% this week.

Bitcoin touched its highest level since mid-June at around $25,000 but erased all of its daily gains to close at $24,000 on Thursday. BTC/USD stays calm near that level during the European morning. Ethereum lost its bullish momentum before reaching $2,000 and returned below $1,900. Nevertheless, ETH/USD is up more than 10% this week and remains on track to post sixth straight weekly gains.