Good morning traders from a cloudy 20°C Amsterdam, with mild conditions around IntelliTrade HQ and the coffee doing more work than the weather today. The screens are giving us a strange mix: Fed expectations have softened, but bond yields are pushing into multi-year extremes, oil is back above $90 and technology shares are getting hit again. For me, that disconnect is the whole market story today.
Overall Market Sentiment:
The mood is defensive.
Technology shares are under pressure, the Nasdaq is down more than 1%, semiconductor stocks have been hit much harder, and long-term government yields are sitting around levels we have not seen in years.
Normally, softer U.S. employment, mild CPI, flat PPI and weak retail sales should create a much friendlier rates environment.
Instead, oil is back above $90 and the U.S. 30-year yield has climbed to its highest area since 2007.
That is what matters today.
My actual view is that the Fed story has become softer, but the inflation credibility story has not. The market is separating what the central bank might do in September from what investors demand to hold long-term debt.
The mistake here would be assuming falling Fed expectations automatically mean falling yields, a weaker dollar and stronger risk assets.
Today is showing us exactly why that does not always happen.
Geopolitics:
The U.S.-Iran conflict has moved back toward escalation rather than resolution. Iran has warned that it is shifting toward a more offensive military posture, while the Strait of Hormuz remains effectively restricted and hopes for a durable agreement have faded again.
Brent has moved above $90 and reached its strongest area in almost three weeks.
That matters because energy is rebuilding the inflation risk that softer U.S. data had started removing.
I would not overcomplicate this. The Fed can look at July CPI and say inflation improved. The bond market can look at oil above $90 and ask what August and September inflation will look like instead.
Both can be right at the same time.
Macro Calendar:
Today
- UK labour market: Unemployment held at 4.9%, slightly weaker than markets expected, while vacancies dropped to 707,000, their lowest level since 2021. Private-sector regular wage growth slowed to 2.8%, its weakest pace since late 2020. That takes some pressure away from the Bank of England and makes Wednesday’s CPI even more important for GBP.
- U.S. housing starts: Total housing starts dropped 12.4% in July to an annualised 1.239 million, while single-family construction fell 9.9%. High mortgage rates and affordability pressure are still doing real damage to the housing side of the economy.
- U.S. manufacturing: Factory output increased 0.2% in July, helped by technology and AI-related investment, with semiconductor production rising strongly. That is a useful reminder that the U.S. economy is not weakening everywhere at the same speed.
The rest of this week
- Wednesday, UK CPI: This is now a much bigger sterling event after today’s softer labour numbers. If inflation also cools, the market has less reason to expect further BoE restriction. Sticky services inflation would keep the story more complicated.
- Wednesday, Australian wages: Wage growth will show whether Australia still has enough domestic inflation pressure to support the RBA’s relatively firm stance. AUD has held up well, so this is an important confirmation test.
- Wednesday, Federal Reserve minutes: The minutes cover a meeting that happened before payrolls weakened, CPI and PPI cooled and retail sales disappointed. I care less about whether the language looks hawkish or dovish and more about what policymakers were worried about before those softer numbers arrived.
- Thursday, Australian employment and U.S. jobless claims: AUD gets its second major domestic test, while U.S. claims will help show whether weaker hiring is turning into more actual job losses.
- Friday, Japanese CPI and global flash PMIs: Japanese inflation matters with USD/JPY still close to 160 and BOJ tightening expectations building. The PMIs will then tell us whether August growth and pricing pressure are holding up across the major economies.
Currency Outlooks:
⚖️ USD - The Fed advantage is fading, but the bond market is replacing it
The dollar index is around 99.6, with EUR/USD near 1.1590, GBP/USD around 1.3540 and USD/JPY close to 159.5.
The Fed story itself has become fairly straightforward.
Markets now see roughly a 70% probability that rates remain unchanged in September. U.S. employment weakened, CPI was mild, producer prices were flat and retail sales disappointed.
If that were the whole story, I would expect a cleaner dollar decline.
It is not the whole story.
The U.S. 10-year yield is still around 4.71%, while the 30-year yield has pushed above 5.2% and into its highest area since 2007. Oil above $90 is also keeping inflation risk alive.
The cleaner read for me is mixed.
USD has lost short-term policy support, but long-term yields and geopolitical demand are providing another foundation underneath it.
Dollar risks lean softer if those yields finally follow Fed expectations lower. Until then, I would not call the dollar broken.
⚖️ EUR - Softer Fed expectations help, but $90 oil is the problem
EUR/USD is around 1.1590, holding close to Monday’s two-month high.
The euro is benefiting from the weaker U.S. policy story. That part remains constructive.
Oil is working directly against it.
Europe imports a large amount of energy, so Brent above $90 raises business costs, weakens household purchasing power and makes the ECB’s inflation-growth mix harder again.
That is why EUR is not accelerating even with the Fed outlook becoming softer.
The cleaner read for me is balanced with a mild positive tilt. EUR can hold up while U.S. short-term yields remain contained, but another serious oil move would weaken that advantage quickly.
🔻 GBP - Today’s labour numbers weaken part of the BoE argument
GBP/USD is holding near 1.3540, still close to its strongest level in several months despite today’s softer UK employment data.
The details matter.
Unemployment stayed at 4.9%. Vacancies dropped again. Private-sector regular pay growth slowed to 2.8%.
That is not an employment collapse, but it is clearly not a labour market demanding aggressively tighter policy either.
Wednesday’s CPI now becomes the deciding piece.
If inflation stays sticky while wages cool, the BoE faces an awkward supply-driven inflation problem. If both wages and inflation soften, sterling loses some of the relative rate support that helped it recently.
Risks lean mildly toward weakness after today’s data, but tomorrow can change that quickly.
⚖️ CAD - Inflation support meets a very large tariff risk
USD/CAD is around 1.39, with the Canadian dollar giving back part of Monday’s move to its strongest area in more than two months.
Canada’s July inflation rate accelerated to 3.0%, while underlying inflation measures remained much closer to the Bank of Canada’s target. That is important because the headline acceleration was heavily influenced by gasoline rather than a broad domestic inflation surge.
Oil above $90 helps CAD.
The problem is trade.
New 50% U.S. tariffs on a large group of Canadian goods are scheduled to take effect at midnight on Wednesday unless an agreement is reached.
That is why I see CAD risks as mixed rather than clearly strong. Employment and oil provide support, but tariff uncertainty can easily overwhelm both if the dispute escalates.
⚖️ CHF - Defensive demand helps, but the dollar still has the yield
USD/CHF is around 0.812.
The franc should normally benefit from a day where technology shares are falling, geopolitical tensions are escalating and oil is rising.
It is receiving some of that support.
But the dollar has the same defensive argument plus a much higher yield profile.
That keeps CHF more interesting against cyclical currencies than against USD itself.
Risks remain balanced. Its defensive case strengthens if today’s technology decline spreads into a wider growth scare.
⚖️ JPY - The yield story is becoming uncomfortable on both sides
USD/JPY is around 159.5, with the yen once again sitting close to the intervention-sensitive 160 region.
The old problem remains.
U.S. yields are high and the gap between American and Japanese rates is still large enough to pressure JPY.
But there is something new happening underneath.
Japanese government yields are climbing as well. The 10-year Japanese yield has moved toward levels not seen in roughly three decades as markets price a faster BOJ normalisation cycle.
Friday’s Japanese CPI could reinforce that.
So the yen story is no longer simply “high U.S. yields equal weak JPY.”
The mistake here would be forgetting intervention as well. Authorities have already shown they are willing to become involved when the currency move becomes disorderly.
Risks are mixed, but the downside risk around further JPY weakness becomes much less comfortable near 160.
🔺 AUD - Holding up well before wages and employment
AUD/USD is around 0.7110, close to the multi-week highs reached earlier this week.
The currency still has a reasonable domestic foundation.
The RBA kept rates unchanged last week but made clear that inflation remains too high and that further restriction is possible if domestic pressure does not ease.
Wednesday’s wage data and Thursday’s employment report now have to support that message.
The global backdrop is less helpful today because technology shares are under pressure and Chinese domestic demand remains uneven.
Even so, risks lean modestly toward AUD strength while the RBA retains a firmer relative policy outlook than the Fed.
That tilt weakens if wages and employment both disappoint.
🔻 NZD - Global dollar weakness cannot hide the softer domestic story
NZD/USD is around 0.5880, down from Monday’s move above 0.59.
The domestic picture remains less convincing than Australia’s.
New Zealand unemployment has risen to 5.6%, wage pressure has cooled and the economy is carrying more labour-market slack.
Markets still expect the RBNZ to remain inflation-sensitive, but the central bank has less room to ignore growth than the RBA does.
Add weaker Chinese consumer demand and today’s defensive global mood, and NZD has struggled to hold the benefit from softer USD expectations.
Risks lean toward relative weakness for now.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,360 to $4,370, down roughly 1% after recently trading above $4,400. Softer Fed expectations remain supportive underneath, but surging U.S. real yields and higher oil-driven inflation fears are creating a much stronger headwind today. Watch whether the Fed minutes can bring the long end of the Treasury curve closer to the softer policy story. [USD] [REAL YIELDS] [FED]
- 🥈 Silver: XAG/USD is trading around $63.90 to $64.00, down close to 3% and underperforming gold. Higher yields are weighing on precious metals generally, while the sharp semiconductor decline adds another problem through silver’s industrial-demand channel. Watch whether global PMIs later this week confirm enough manufacturing resilience to stabilise that side of the story. [YIELDS] [TECHNOLOGY] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $90.50 to $91.00 per barrel, its strongest area in almost three weeks and up for a third consecutive session. Stalled U.S.-Iran diplomacy, Iran’s more aggressive military posture and continued restrictions through the Strait of Hormuz are rebuilding the supply premium. Watch physical shipping flows and whether the conflict moves toward another direct escalation. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: The S&P 500 is around 7,700, down roughly 0.5% today, while the Nasdaq is down more than 1% and semiconductor shares are falling much more sharply. High long-term yields are hurting expensive growth valuations, while doubts around the scale and financing of AI investment are adding sector-specific pressure. Watch whether the weakness stays concentrated in technology or spreads into the wider market. [TECHNOLOGY] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around $64,700, inside a session range of roughly $64,000 to $64,900. Softer near-term Fed expectations support liquidity, but elevated real yields and weaker technology sentiment are stopping that backdrop from becoming properly risk-on. Watch whether Bitcoin continues holding independently from the Nasdaq decline or reconnects with broader high-beta pressure. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is that the Fed and the bond market are telling us different stories.
The Fed story says patience.
Jobs weakened.
Inflation cooled.
Retail spending disappointed.
Markets see much less chance of another September increase.
But the long end of the bond market is basically saying, “Fine, but we still do not trust the inflation outlook.”
That matters.
Oil is back above $90. Government borrowing remains huge. AI investment is creating another wave of corporate financing demand. Long-term investors want more compensation to hold debt.
That is why the 30-year yield can reach its highest level since 2007 at the same time markets reduce expectations for Fed tightening.
I think that distinction is the biggest thing traders should not misunderstand today.
A softer Fed does not automatically mean easier financial conditions.
If mortgage rates stay high, corporate borrowing remains expensive and equity valuations come under pressure, the economy still feels tighter conditions even with no additional central-bank action.
That also explains why the dollar is refusing to collapse.
USD has lost some policy support, but it still has yield and defensive demand.
The pound is showing the opposite issue. Sterling has enjoyed a decent policy advantage, but today’s labour data are starting to weaken the domestic reason behind it.
AUD looks cleaner because the RBA still has inflation concerns and its labour data have not arrived yet.
CAD has strong employment and oil support, but the tariff deadline is a serious complication.
JPY is probably the currency I would be most careful with around current levels. The yen still has a yield disadvantage, but Japanese yields are rising, BOJ expectations are changing and authorities have already shown that 160 is politically sensitive.
I would not overcomplicate the rest of this week.
Tomorrow gives us UK inflation, Australian wages and the Fed minutes.
Thursday tests Australia’s labour market.
Friday gives us Japanese inflation and the first broad August PMI picture.
My actual view today is that USD weakness has become less convincing while long-term yields and oil move higher together.
That does not restore the dollar’s old Fed advantage.
It creates a different kind of support.
And that is exactly why this market feels more defensive today even though the Fed itself looks less likely to tighten next month.
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This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.
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