Good morning traders from a mostly cloudy 15°C Amsterdam, where it is a cool Sunday start around IntelliTrade HQ before temperatures move toward 20°C later today. Coffee is on the desk, the screens are quieter, and I think this week comes down to something bigger than whether the Fed changes its tone by a few words. The dollar has weakened while U.S. long-term yields stayed extremely high, gold and Bitcoin exploded higher, and oil finished above $94. That is not a normal combination, and I would not treat it like one.
Overall Market Sentiment:
The market starts the week cautious and fragile.
The dollar has weakened, but financial conditions are not obviously easy. Long-term U.S. yields remain elevated, Brent is above $94 and equities just finished a difficult week despite Friday’s rebound.
The two drivers I care about are U.S. policy credibility and long-term yields. Everything else this week, including PCE, Jackson Hole, Nvidia, gold and the dollar, feeds back into that tension.
Weekly Thesis:
Can the dollar keep weakening if U.S. yields stay high, or does Jackson Hole rebuild confidence in the U.S. policy story? My base case is that USD remains under pressure but the decline stays selective because high real yields and expensive oil still provide support underneath. Wednesday’s PCE data and Friday’s Jackson Hole speech are the two events that can decide whether recent dollar weakness becomes a broader macro move or simply another temporary loss of confidence.
Scenario Map:
- Base case, 50%: PCE remains uncomfortable but does not materially change September Fed expectations, while Jackson Hole stresses inflation credibility without promising a near-term policy move. USD stays softer overall, long yields remain elevated, gold stays supported and FX continues sorting currencies by their own domestic fundamentals.
- Risk-on scenario, 25%: PCE cools, Jackson Hole sounds patient and long-term Treasury yields finally move lower in a more convincing way. Dollar pressure broadens, equities get relief from financing costs and cyclical currencies receive a cleaner global backdrop.
- Risk-off escalation scenario, 25%: PCE stays sticky, oil pushes further above $95 or Jackson Hole reinforces inflation concern while fiscal stress keeps long yields high. Equities struggle, gold and CHF retain defensive support, and the dollar reaction becomes complicated because higher yields compete with weaker confidence in U.S. assets.
What Changed Since Last Week:
The dollar fell to a three-month low even while the U.S. 30-year Treasury yield reached its highest area since 2007. Gold surged above $4,600 and Bitcoin moved above $77,000 as markets questioned whether Treasury efforts to calm long yields were weakening confidence in the currency instead.
Brent also finished above $94 after six consecutive daily gains, so the softer Fed story now has to coexist with another rise in energy inflation.
That strengthens the softer-USD thesis, but it also makes it much less clean than a normal rate-driven dollar decline.
Geopolitics:
The U.S.-Iran conflict remains central because commercial traffic through the Strait of Hormuz is still severely restricted and new U.S. sanctions are threatening another tightening in Iranian supply.
Iran has allowed some Iraqi tankers through, but that is not the same thing as a normalised shipping corridor. Brent finished Friday at $94.39, up more than 6% for the week.
That matters because the Fed is trying to judge softer employment and inflation data while the forward-looking energy picture is getting worse again. The mistake here would be assuming July’s inflation improvement tells us everything we need to know about the next few months.
Macro Calendar:
The week ahead
- Tuesday, RBA minutes and German business sentiment: The RBA minutes were written before Australia’s weak employment report, so markets will be looking for how strongly policymakers were already leaning against further tightening. German business confidence will meanwhile test whether the improvement in euro-area manufacturing is developing into something more durable.
- Wednesday, U.S. GDP and core PCE: This is the week’s main macro release. Second-quarter U.S. growth was initially estimated at 1.5% annualised, so revisions matter, but the bigger FX question is whether July core PCE confirms the cooling already seen in CPI and PPI. Softer inflation would weaken the Fed argument further, while sticky pressure would remind markets why long-term yields remain elevated.
- Wednesday, Nvidia earnings: This is not an FX release, but I would absolutely keep it in the macro map. AI investment is absorbing enormous amounts of capital and financing, so the market needs evidence that the revenue and cash-flow side can keep up. Another valuation scare would matter for equities, bond financing and risk-sensitive currencies.
- Thursday, Jackson Hole begins: Global central bankers meet while bond markets are already questioning inflation, fiscal credibility and the level of long-term borrowing costs. The broader discussion matters because this is not only a U.S. problem anymore.
- Friday, Fed Chair Kevin Warsh at Jackson Hole: This is the week’s main policy event. Markets need to hear how the Fed separates weaker employment from persistent inflation, and whether policymakers are comfortable with a Treasury market where long yields remain high even as near-term Fed expectations soften.
- Friday, Tokyo CPI: Japan’s inflation report matters because USD/JPY remains near politically sensitive territory while markets are already considering further BOJ normalisation. Firm domestic inflation would strengthen the case that Japan can gradually close part of its policy gap with the United States.
Currency Outlooks:
🔻 USD - The problem is no longer just the Fed
The dollar index finished Friday around 98.8, while EUR/USD closed near 1.1680 and sterling held around 1.3650.
That is a meaningful decline.
The interesting part is that U.S. yields are not behaving like a normal weak-dollar environment. The 30-year yield reached around 5.3% last week and the 10-year remains close to 4.7%.
So why is USD not stronger?
For me, markets are starting to distinguish between a yield advantage created by attractive U.S. policy and a yield premium created by concern about fiscal risk, inflation and heavy government financing.
Those are not the same thing.
The cleaner read for me is that dollar risks lean toward weakness this week, but I expect plenty of resistance if PCE stays firm or Jackson Hole puts inflation credibility back at the centre of the discussion.
The dollar has weakened. The part traders should not misunderstand is that high yields alone may not rescue it if those yields are rising for the wrong reasons.
🔺 EUR - Europe finally has more than dollar weakness behind it
EUR/USD finished near 1.1680 after briefly pushing above 1.17.
The euro’s recent move has a better foundation than it did earlier in the summer. Euro-area business activity improved sharply in August, manufacturing reached its strongest pace in years and markets are becoming more sensitive to the possibility that the ECB may need to remain restrictive for longer.
That matters because EUR no longer depends entirely on something going wrong in the United States.
Oil is the obvious problem.
Brent above $94 is expensive for an energy-importing region, and a move back toward July’s extremes would hit household purchasing power and industrial margins quickly.
Risks lean toward relative EUR strength while European activity holds up and U.S. policy confidence remains under pressure. That tilt weakens if energy becomes the dominant European story again.
🔺 GBP - Sterling has quietly built a decent relative foundation
GBP/USD finished around 1.3650, close to its strongest area since February.
The UK picture is not perfect, but sterling has more going for it than simple USD weakness.
Second-quarter growth held up. Services activity remains resilient. The Bank of England still has an inflation problem, even though wage and services pressure have cooled from their peaks.
There is no huge UK event this week, which means GBP should be more sensitive to the global yield and dollar story.
My tilt remains toward relative strength while the BoE retains a firmer policy profile and UK activity avoids a sharper slowdown.
The view weakens if oil keeps climbing because imported inflation without stronger domestic growth is not a clean sterling-positive story.
🔻 CAD - The weekend changed this story
CAD had a strong domestic setup going into Friday.
Employment had improved, unemployment had fallen and Brent was above $94. Under normal conditions, that would provide a useful cushion.
Then the U.S.-Canada trade negotiations failed.
The United States has now imposed 50% tariffs on roughly $20 billion of Canadian goods, and Canada has announced dollar-for-dollar retaliation beginning in September.
That is a serious change in the week-ahead picture.
Canada sends close to 70% of its exports to the United States, so the growth risk from a deeper trade conflict can outweigh part of the benefit from expensive crude.
The cleaner read for me now leans toward CAD weakness.
Oil is helping, but it is no longer the main story. The mistake would be looking at Brent above $94 and assuming Canada automatically wins from it while one of its largest trade relationships is deteriorating at the same time.
🔺 CHF - Defensive demand now has a fiscal angle too
The franc enters the week with a better defensive setup than it had a month ago.
Middle East tensions remain elevated, global bond markets are unstable and the dollar itself is no longer acting like the obvious destination whenever investors become uncomfortable.
That last part matters.
CHF normally has to compete with a dollar that offers both safety and higher yields. When confidence in U.S. fiscal policy becomes part of the market concern, that advantage becomes less automatic.
Risks lean toward CHF strength while bond volatility, geopolitics and U.S. policy uncertainty remain elevated.
The bias weakens if Jackson Hole restores confidence in the Fed and long Treasury yields fall for a healthier reason rather than because of policy intervention.
⚖️ JPY - Better fundamentals, but the rate gap still refuses to disappear
USD/JPY finished around 159, still close enough to 160 that intervention risk cannot be ignored.
Japan’s domestic story has improved.
Inflation firmed. Private-sector activity accelerated. The BOJ is becoming more open to further normalisation. U.S. near-term Fed expectations have also softened.
That should help JPY.
The reason I am still keeping the tilt balanced is the long end of the U.S. Treasury market. As long as U.S. yields remain this high, the rate gap continues doing real damage to the yen.
Friday’s Tokyo CPI can help the domestic side of the argument.
The cleaner read for me is that JPY has more support than the current exchange rate suggests, but it probably needs either lower U.S. yields or a more explicit BOJ policy shift before that support becomes convincing.
And around 160, the market also has to respect the fact that authorities have already shown they are willing to become involved.
🔻 AUD - Weak employment changed the RBA conversation
AUD benefited from the softer dollar earlier in August, but last week’s Australian labour report weakened the domestic story.
Employment fell, unemployment rose to 4.5%, participation softened and hours worked declined. That makes it harder for the RBA to keep presenting inflation as the only problem that matters.
Tuesday’s minutes will still sound relatively cautious because they describe the meeting before those jobs numbers arrived.
That is exactly why I would not overreact to a firm tone in the document.
The cleaner read for me is that AUD risks lean toward weakness on the domestic side. Global dollar weakness can provide support, but softer employment and uneven Chinese domestic demand make Australia less convincing than EUR or GBP right now.
🔻 NZD - Still waiting for its own reason to strengthen
NZD has benefited from the broader decline in USD, but New Zealand’s domestic foundation remains one of the softer ones in G10.
Unemployment has risen, wage pressure has cooled and the labour market carries more slack. That gives the RBNZ less freedom to focus only on inflation.
There is also no major domestic event this week likely to change the picture dramatically.
That leaves NZD relying heavily on global yields, China and general risk appetite.
Risks lean toward relative weakness.
The tilt improves if PCE cools, Treasury yields decline properly and global equities regain momentum after Nvidia. But until then, most of NZD’s support is coming from outside New Zealand itself.
Cross-Asset Wrap:
- 🪙 Gold: Gold finished Friday around $4,620 to $4,660 per ounce, reaching its highest region in more than three months and gaining more than 5% across the week. Dollar weakness and concern around U.S. fiscal credibility were the dominant drivers, while geopolitical uncertainty and unstable real yields added support. Watch Wednesday’s core PCE and Friday’s Jackson Hole speech for whether real yields finally align with the weaker-dollar story or move higher again. [USD] [REAL YIELDS] [FISCAL RISK]
- 🥈 Silver: XAG/USD finished around $69.60, extending a third weekly advance and broadly following gold higher. The softer dollar helped the monetary side, while stronger manufacturing data from Europe and Japan improved the industrial-demand picture despite high borrowing costs. Watch Nvidia and U.S. growth data because silver needs the manufacturing and technology story to stay healthy if it is going to keep pace with gold. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent settled Friday at $94.39 per barrel, its highest area in roughly a month and up about 6.4% for the week. Restricted Hormuz traffic, tighter Iranian supply and the threat of broader U.S. sanctions remain the dominant drivers, while alternative supply routes are preventing another move toward July’s extremes. Watch actual commercial traffic through Hormuz and whether the new sanctions push supply conditions tighter. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: The S&P 500 closed Friday at 7,674, up 0.4% on the day but down roughly 1.4% for the week, while the Nasdaq finished near 26,180 and lost about 2% across the week. High long-term yields and questions around AI financing pressured growth shares, while Friday’s strong services activity helped stabilise the wider market. Watch Nvidia on Wednesday and Jackson Hole on Friday because earnings credibility and financing costs are now hitting the same valuation debate. [AI] [YIELDS] [EARNINGS]
- ₿ Crypto: Bitcoin is trading around $77,000 to $77,300 this Sunday after briefly reaching roughly $79,000 during Friday’s surge and gaining more than 20% across the week. Dollar weakness, improved liquidity expectations, strong ETF demand and forced position unwinding all contributed to the rally, while regulatory optimism added a crypto-specific layer. Watch whether PCE and Jackson Hole keep pressure on the dollar without pushing real yields sharply higher again. [LIQUIDITY] [USD] [RISK]
The main thing I care about this week is whether markets are starting to question the dollar for a different reason than they did earlier in the summer.
Earlier dollar weakness was fairly easy to explain.
Fed expectations cooled.
Jobs weakened.
Inflation improved.
That is normal macro.
Last week was different.
Long Treasury yields stayed extremely high.
The dollar still fell.
Gold surged.
Bitcoin surged.
That tells me investors were not simply pricing easier Fed policy.
They were asking harder questions about U.S. fiscal policy, debt issuance and whether efforts to push long-term borrowing costs lower are actually improving confidence or weakening it.
That is a much bigger conversation.
The mistake here would be seeing a 5.3% long bond yield and assuming the dollar must automatically benefit.
A high yield is attractive when investors believe they are being rewarded for holding a strong asset.
A high yield looks very different when investors believe they need extra compensation for fiscal uncertainty, inflation risk or unstable policy.
That distinction is probably the most important thing in the market right now.
And this is why Jackson Hole matters more than a normal Fed speech.
Kevin Warsh has to talk about inflation while employment is weakening.
He has to talk about financial conditions while long yields remain extremely high.
He has to talk about policy credibility while the Treasury is actively trying to influence the bond market.
And he has to do all of that with oil above $94.
I would not overcomplicate the PCE report either.
If core PCE cools, it strengthens the argument that the Fed can stay patient. But I want to see what the bond market does with that information.
If PCE cools and long yields fall, the softer-dollar story becomes much cleaner.
If PCE cools and long yields stay near their extremes, then the market is telling us those yields are increasingly about fiscal and supply concerns rather than the Fed.
That could keep pressure on the dollar for a very different reason.
If PCE stays firm, then Warsh gets a harder job on Friday. He has to explain why inflation still matters without sounding indifferent to the deterioration in employment.
There are also some important currency differences this week.
EUR now has improving European activity behind it.
GBP still has a reasonable domestic growth and policy foundation.
CHF benefits if distrust of U.S. policy becomes part of the defensive story.
JPY has better Japanese inflation and BOJ expectations, but still needs help from U.S. yields.
AUD has lost part of its domestic policy support after weak employment.
NZD still lacks a strong independent catalyst.
And CAD has probably had the biggest change of all.
The Canada story was looking cleaner after strong employment and higher oil. The weekend collapse in U.S.-Canada negotiations has changed that. A 50% tariff on major Canadian exports creates a growth problem that crude alone cannot simply cancel out.
That is exactly why Sunday should not just be a recap of Friday’s closing prices.
The market has changed since Friday.
My actual view is that USD risks lean toward weakness this week, but I do not think it becomes a clean broad dollar decline unless long Treasury yields finally start confirming it.
PCE tells us whether the inflation argument is fading.
Nvidia tells us whether AI investment can justify the financing behind it.
Jackson Hole tells us whether the Fed can restore confidence in the policy framework.
Oil tells us whether inflation relief can survive the geopolitical reality.
I would not overcomplicate the week beyond those four things.
The dollar has lost momentum.
Now we find out whether it has lost trust as well.
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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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