Fundamental Market Analysis for July 31, 2026 (EURUSD, GBPUSD, USDJPY)
EURUSD:
The eurozone economy delivered a stronger result than the market had expected, with GDP expanding by 0.4% in the second quarter after stagnating at the beginning of the year. This supports the euro and reduces concerns about an immediate deterioration in business activity. However, the ECB kept the deposit rate unchanged at 2.25%, while future decisions remain dependent on inflation and the resilience of domestic demand.
The main momentum in the current session remains in favor of the US dollar. The American currency is recovering from its earlier decline, while the interest rate differential between the Federal Reserve and the ECB continues to weigh on the euro. Slower US inflation limits the dollar’s upside potential but does not eliminate its advantage, as the Federal Reserve’s rate remains significantly higher and the market awaits new data on labor costs and business activity.
Stronger eurozone GDP growth may limit the decline in EURUSD, making the selling scenario less straightforward. Nevertheless, the euro is no longer receiving additional support from the latest data, while the dollar is strengthening against most major currencies. If the current momentum persists, the base-case scenario allows for a further moderate decline in the pair.
Trading idea: SELL 1.1510, SL 1.1540, TP 1.1440
GBPUSD:
The Bank of England kept its interest rate unchanged at 3.75%, although the voting split showed greater concern about inflation risks, with three committee members supporting a rate increase. This signal supports the pound, but the central bank also noted limited evidence of a sustained pass-through from higher energy costs into domestic prices. Expectations of near-term policy tightening therefore remain restrained.
The advantage in GBPUSD is shifting toward the US dollar. The Federal Reserve also left its rate unchanged, but its 3.50–3.75% target range remains comparable with the Bank of England’s rate, while the US economy continues to demonstrate more resilient domestic demand. The market has reduced expectations of an imminent UK rate increase, and the pound is losing ground against the dollar early in the session despite the more restrictive committee vote.
Weakness in the UK labor market and the risk of slower consumer spending limit the pound’s ability to develop an independent advance. At the same time, upcoming US data may increase volatility and weaken the dollar if it confirms a further easing of inflationary pressure. Until that happens, the current fundamental backdrop continues to favor a moderate decline in GBPUSD.
Trading idea: SELL 1.3445, SL 1.3480, TP 1.3365
USDJPY:
The Bank of Japan kept its short-term interest rate unchanged at 1%, providing the market with no new reason for a sustained strengthening of the yen. One board member supported a rate increase, while the central bank maintained the possibility of further action if inflation risks intensify. However, the decision to leave the rate unchanged supported a recovery in USDJPY after the sharp decline during the previous session.
The interest rate differential remains the main factor supporting the dollar. The Federal Reserve’s rate stands within the 3.50–3.75% range, while the yield on the 10-year US Treasury remains above 4.6%. Under these conditions, interest rate differential trades remain attractive, while the absence of immediate tightening by the Bank of Japan limits demand for the yen.
The main risk to the USDJPY buying scenario remains confirmed action by the Japanese authorities in the foreign exchange market and the possibility of renewed intervention if the yen weakens again. This factor could trigger a sharp reversal, meaning that the pair’s upside potential is not one-sided. Nevertheless, following the Bank of Japan’s decision, the current fundamental momentum continues to favor a further recovery in USDJPY.
Trading idea: BUY 160.80, SL 160.25, TP 161.90
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