Good morning traders from a lightly rainy but mild Amsterdam, where it is around 19°C near IntelliTrade HQ and brighter spells should arrive after a few showers later today. Coffee is poured, the Sunday charts are open, and this week does not need a complicated introduction. Three major central banks are meeting while oil is still deciding whether the inflation scare gets bigger or finally cools down.
Overall Market Sentiment:
The market regime is defensive, but not in panic mode. Brent pulled back below $100 on Friday, yet it still finished a very strong week as conflict and shipping risks kept the energy premium alive.
For me, the two drivers are oil and bond yields. If they stay elevated together, the dollar keeps support and risk assets remain selective. If both cool, markets can return to the softer inflation story that was starting to build earlier in July.
Weekly Thesis:
Can the Fed, Bank of England and Bank of Japan stay patient while energy prices threaten another inflation wave? My base case is that all three avoid a major policy surprise, but their communication stays cautious enough to keep global yields firm. That leaves USD supported, JPY vulnerable and EUR and GBP sensitive to how each central bank explains the difference between temporary energy inflation and persistent domestic pressure.
Scenario Map:
- Base case, 55%: Brent remains in the mid-to-high $90s, the major central banks keep policy unchanged and their language stays inflation-sensitive. The dollar remains firm, the yen struggles and equities become more selective rather than collapsing.
- Risk-on scenario, 20%: Diplomatic progress reduces the energy premium, Treasury yields cool and central banks sound patient. USD momentum fades, AUD and NZD receive some relief, and equities broaden beyond a small group of defensive sectors.
- Risk-off escalation scenario, 25%: Shipping disruption worsens, Brent returns above $100 and inflation expectations rise again. USD and CHF attract defensive demand, high-valuation equities and crypto face more pressure, and JPY stays complicated because safe-haven demand clashes with Japan’s energy and yield problem.
What Changed Since Last Week:
Oil briefly broke above $100 before easing toward $97, but it still gained close to 10% over the week. The dollar recorded its strongest weekly advance since mid-June, while the yen suffered its largest weekly decline in more than two months and moved close to 164 per dollar.
Technology also stopped acting like the easy place to hide. Heavy AI spending, weaker chip performance and higher long-term yields turned the equity story much more selective.
Geopolitics:
The U.S.-Iran conflict, threats around the Strait of Hormuz and pressure on Red Sea shipping remain central to the macro picture. Friday’s oil retreat reflected fresh diplomatic efforts, but tanker traffic and supply-route risk have not fully normalised.
That matters because central banks are meeting before they know whether this is a short-lived price spike or a more persistent supply shock. The mistake here would be treating one softer oil session as the end of the inflation problem.
Macro Calendar:
The week ahead
- Wednesday, Australian CPI: Australian inflation was still running near 4% in May, so the June report matters for whether the RBA can stay patient. AUD needs the data to clarify whether it is trading mainly as a rate currency or as a China and risk proxy.
- Wednesday, Federal Reserve decision: The Fed is widely expected to keep the policy range unchanged, and this meeting does not include new economic projections. The real question is whether the statement and press conference lean harder into oil, tariffs and the possibility of another increase later this year.
- Thursday, Bank of England decision and Monetary Policy Report: The BoE is expected to leave Bank Rate unchanged, but it will publish updated forecasts. Sterling will care about how much weight policymakers place on softer domestic inflation versus imported energy pressure and the new government’s fiscal direction.
- Thursday, U.S. GDP and PCE inflation, plus euro-area GDP: This is a dense macro day. U.S. growth and the Fed’s preferred inflation measure will test the message delivered one day earlier, while euro-area GDP will show how much damage weak demand and expensive energy are doing to the region.
- Friday, Bank of Japan decision, euro-area inflation, China PMIs and Canadian GDP: The BOJ’s Outlook Report is the main FX event because the yen is near a four-decade low and imported inflation is rising. Euro-area CPI, Chinese business surveys and Canadian growth will then test the outlook for EUR, AUD, NZD and CAD into the weekend.
Currency Outlooks:
🔺 USD - The dollar has the advantage, but the Fed still has to justify it
The dollar starts the week with stronger momentum after oil and Treasury yields moved higher together. The index is around the 101 area, EUR/USD is near 1.14 and USD/JPY is close to 164, so the strength is broad enough to matter.
The Fed is unlikely to surprise just for the sake of reacting to one week of expensive energy. The cleaner read for me is that the statement can stay patient while the press conference keeps the possibility of later tightening alive.
That combination would preserve USD support without creating certainty. The bias weakens if Brent falls further, Thursday’s PCE data cools and long-term yields retreat after the meeting.
🔻 EUR - Energy exposure is becoming harder to ignore
EUR/USD finished near the upper 1.13s after the ECB kept rates unchanged and left the door open to further action. The euro still lacks a clean advantage because Europe’s inflation risk is being driven by imported energy while domestic growth remains soft.
This matters because a more cautious ECB is not automatically a stronger-euro story. Policy that becomes restrictive because supply costs are rising can hurt demand before it creates meaningful currency support.
Risks lean toward weakness while oil stays elevated and the U.S. yield advantage remains wide. That tilt improves if Friday’s inflation data stays contained and euro-area GDP avoids another disappointment.
⚖️ GBP - The BoE has to separate softer inflation from the oil shock
GBP/USD ended last week around 1.332 after snapping a three-week run of gains. Sterling still has some domestic rate support, but softer June inflation and questions around the new government’s fiscal plan have made the picture less comfortable.
Thursday’s Monetary Policy Report is the main test. I would focus less on the decision and more on whether the BoE lowers its domestic inflation path while lifting the risk from energy.
GBP risks remain mixed. A steady policy message can help, but the bias weakens if the bank sounds more worried about growth than markets expect.
⚖️ CAD - Oil helps, tariffs hurt, and growth data gets the final word
USD/CAD ended Friday near 1.410 after CAD weakened over the week despite expensive crude. That tells us oil support is being offset by tariff risk, a wider U.S.-Canada yield gap and concern about the Canadian economy.
Friday’s GDP report matters because Canada needs evidence that activity is stabilising before the energy benefit can dominate again. Stronger crude still provides a cushion, but it is not fixing the whole story.
The tilt stays mixed while those forces pull in opposite directions. CAD’s outlook improves if oil holds firm without another global growth scare and domestic data stops weakening.
⚖️ CHF - Defensive, but still competing with the dollar’s yield
CHF starts the week with safe-haven support underneath it, especially while shipping and geopolitical risk remain unresolved. The problem is that the dollar offers both defensive demand and a much stronger yield profile.
The cleaner read is neutral against USD but firmer against more cyclical currencies. CHF’s defensive case strengthens if oil jumps again and equity weakness broadens.
🔻 JPY - The BOJ meeting arrives with the currency already under pressure
USD/JPY finished close to 164 after reaching its highest area since 1986. The yen is not only dealing with the U.S. yield gap now. Higher imported energy costs are also worsening Japan’s trade and inflation mix.
The BOJ recently lifted its policy rate to 1%, but markets are asking whether that pace is still enough. Friday’s Outlook Report may raise the growth forecast and keep warnings about inflation overshooting, yet the bank may avoid suggesting that risks have increased dramatically.
JPY risks still lean toward weakness unless the BOJ sounds more urgent or overseas yields fall. The part traders should not misunderstand is intervention risk. Extreme levels can produce violent moves even when the underlying macro problem has not been fixed.
⚖️ AUD - Inflation decides whether the rate story can beat risk aversion
AUD ended last week around the high 0.69s, holding better than the yen but struggling to build on earlier gains. Wednesday’s CPI report is the main domestic event because inflation remains too high for the RBA to relax completely.
A firm reading would reinforce Australia’s relative rate support, but it could also weigh on local growth expectations. The bias remains balanced while China, technology shares and the broader dollar direction continue pulling on the currency from different sides.
⚖️ NZD - Domestic policy support is real, but global risk still dominates
NZD starts the week near the upper 0.57s after recent inflation pressure kept the RBNZ on a restrictive path. That gives the currency a better domestic foundation than it had earlier this year.
Still, this is not a clean NZD story. Higher U.S. yields, fragile equities and uncertainty around China can overpower the local rate advantage. Risks remain balanced, with Friday’s China PMIs likely to matter more than any major New Zealand event.
Cross-Asset Wrap:
- 🪙 Gold: Gold closed Friday around $4,050 per ounce, stabilising after a roughly 2% decline in the previous session. Geopolitical demand remains supportive, while the firmer dollar and higher real yields are limiting momentum. Watch the Fed message, Thursday’s PCE data and whether the U.S. 10-year yield remains near recent highs. [USD] [REAL YIELDS] [GEOPOLITICS]
- 🥈 Silver: XAG/USD ended near $58.10, recovering slightly but still carrying more growth sensitivity than gold. Dollar strength and yields remain headwinds, while industrial demand depends on technology sentiment and whether China’s PMIs show resilience. Watch whether silver keeps tracking gold or underperforms as growth concerns return. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent settled near $96.80 per barrel after briefly moving above $100, leaving it up close to 10% for the week. Shipping threats, Middle East supply risk and disruptions elsewhere supported the surge, while renewed diplomatic efforts triggered Friday’s pullback. Watch tanker traffic through key routes and whether peace discussions remove more of the geopolitical premium. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Wall Street finished Friday mixed, with the S&P 500 almost flat, the Dow up about 0.5% and the Nasdaq down roughly 0.6%. High oil prices, rising yields and concern about the cash demands of AI investment weighed on technology, while some defensive and value sectors held up better. Watch major technology earnings and whether central-bank communication pushes long-term yields higher again. [EARNINGS] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around $64,000 to $64,500 this Sunday, holding inside a relatively calm weekend range after a volatile month. Liquidity expectations remain supportive, but a firm dollar, elevated real yields and weaker technology sentiment are limiting the risk backdrop. Watch whether Bitcoin remains stable through the Fed decision or reconnects with the pressure in high-valuation equities. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about this week is not whether one central bank changes rates by a small amount. It is whether all three admit that the oil shock has changed the risk around their next move.
The Fed has the strongest economy and the strongest currency, so it has more room to stay patient. The BoE has softer domestic inflation but a new imported-price problem. The BOJ has the hardest combination of all: a very weak currency, expensive energy and inflation that is not coming from the kind of healthy domestic demand it wants.
That is where traders can get trapped. A central bank sounding more worried about inflation does not always create a stronger currency. The source of the inflation matters. Demand-driven pressure can support yields and growth at the same time. Supply-driven pressure can lift yields while damaging households and business confidence.
I would not overcomplicate this. Oil sets the problem, central banks explain how they plan to handle it, and bond yields tell us whether markets believe them.
My actual view is that USD begins the week with the cleaner advantage, JPY remains the most exposed major currency and the rest of G10 FX becomes more selective. That view weakens if diplomacy pushes Brent materially lower and the Fed refuses to validate the recent rise in yields. It strengthens if oil returns above $100 and policymakers keep the door open to more tightening.
The dollar has cooled at different points this month, but it is not broken. The yen can still produce sharp rebounds, but its macro problem is not fixed. And oil has pulled back, but the market has not earned the right to ignore it yet.
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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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