Good morning traders from a partly sunny 19°C Amsterdam, with a few showers hanging around IntelliTrade HQ and temperatures staying near 20°C this afternoon. Coffee is on the desk, the dollar is sitting close to a three-month low, gold has pushed through $4,600, Bitcoin is above $76,000 and somehow the U.S. 10-year yield is still around 4.7%. That combination is basically the market story today.
Overall Market Sentiment:
The mood is cautious and still slightly defensive.
Global equities are heading for their weakest week since mid-July, Brent is above $93 and long-term government yields remain elevated. At the same time, the dollar is falling, gold is surging and Bitcoin has jumped almost 20% this week.
That is not a normal risk-on or risk-off setup.
My actual view today is that the dollar has developed a credibility problem on top of its softer Fed story. Markets are questioning whether Treasury intervention can really control long-term borrowing costs without creating another problem for confidence in U.S. assets.
The mistake here would be assuming high Treasury yields automatically mean a stronger dollar.
Usually that relationship makes sense. Right now, investors are asking why those yields are so high in the first place. Fiscal pressure, persistent inflation risk and unconventional Treasury intervention are making that answer less comfortable.
Geopolitics:
Brent is holding around $93 to $94 after reaching a one-month high as the U.S.-Iran conflict remains deadlocked and normal shipping through the Strait of Hormuz has still not returned.
Fresh threats of tougher U.S. sanctions have reduced expectations of a near-term diplomatic breakthrough. That keeps a meaningful supply premium inside crude even as weaker global demand prevents another move toward July’s extremes.
That matters because central banks are getting conflicting information.
Some underlying inflation measures are cooling, but energy is becoming more expensive again. I would not overcomplicate this. Oil above $90 does not erase the softer inflation data we already received, but it makes the next few months much harder for central banks to forecast.
Macro Calendar:
Today
- Japan CPI and PMIs: Core inflation rose 1.8% year-on-year in July, while the measure excluding fresh food and energy increased 1.9%. The more interesting development came from activity, with manufacturing PMI rising to 55.1, services reaching 52.3 and the composite index climbing to 53.4. That gives the BOJ a stronger growth argument, although inflation itself was not aggressive enough to settle the policy debate.
- Euro-area flash PMIs: The composite PMI increased to 52.1, while manufacturing jumped to 52.8, its strongest level in more than four years. New orders grew at their fastest pace in more than three years and employment improved. That is a genuinely useful EUR development because Europe is showing more resilience than expected even with energy prices above $90.
- UK retail sales and PMIs: Retail volumes fell 0.5% in July, but the services PMI climbed to a six-month high of 52.8 and the composite measure improved to 52.5. The cleaner read is that the British consumer cooled after a strong June while the wider services economy remains fairly resilient.
- U.S. flash PMIs, later today: The U.S. numbers now have an unusual job. Markets already know employment and consumption have weakened, so the focus is whether business activity remains resilient and whether input prices are rebuilding as energy costs rise again.
- Canadian retail sales, later today: CAD has benefited from strong employment, expensive crude and reduced trade uncertainty. Household spending can show whether that resilience is becoming broader or remains concentrated in labour and energy.
The week ahead
- Tuesday, RBA minutes and German Ifo: The RBA minutes will show how concerned policymakers were about inflation before this week’s weak Australian employment report. German business sentiment will test whether the manufacturing improvement visible in today’s PMIs is spreading into confidence.
- Wednesday, U.S. GDP and core PCE: The second estimate of Q2 GDP arrives alongside July personal income and spending data, including the Fed’s preferred inflation measure. This is the main macro test before Jackson Hole because weaker growth combined with persistent core inflation would keep the Fed in an uncomfortable position.
- Wednesday, Nvidia earnings: This is not an FX release, but it matters for the entire risk environment. AI investment has required huge amounts of debt and capital, so markets want evidence that revenue and cash generation can justify the scale of spending.
- Thursday and Friday, Jackson Hole: Central bankers gather with global bond markets already under pressure. Fed Chair Kevin Warsh’s first Jackson Hole appearance will be watched for how he thinks about inflation, employment and the recent instability in long-term Treasury yields.
- Friday, Tokyo CPI: Japan gets another important inflation read while markets already price further BOJ normalisation. Firm underlying Tokyo inflation would reinforce the idea that Japan’s policy gap with the United States can narrow further.
Currency Outlooks:
🔻 USD - High yields are no longer enough
The dollar index is around 98.6 to 98.8, close to its lowest level in three months. EUR/USD has pushed above 1.17, while USD/CHF has fallen toward 0.80.
The interesting part is what has not happened.
The U.S. 10-year yield is still around 4.7% and the 30-year is near 5.25%. Normally that should provide strong support for USD.
Instead, the dollar is down almost 1% this week.
The cleaner read for me is that markets are separating yield from confidence.
Recent Treasury efforts to increase long-duration debt repurchases briefly pushed yields lower, but the effect did not last. Investors are still worried about inflation, the fiscal deficit and the level of U.S. government borrowing.
At the same time, recent jobs, CPI, PPI and retail data have weakened the immediate Fed tightening argument.
That combination leaves USD risks leaning toward weakness.
The bias weakens if U.S. activity remains resilient and Jackson Hole convinces markets that the Fed is still prepared to prioritise inflation. But right now, high yields are not giving the dollar the support they normally would.
🔺 EUR - Europe finally has its own reason to participate
EUR/USD has traded around 1.17 to 1.1710, its strongest area in roughly three months.
This move is not only about the dollar anymore.
Euro-area business activity is expanding faster than expected, manufacturing has reached a multi-year high and new orders are improving. Markets are also keeping another ECB increase firmly in the conversation.
That matters because the euro spent much of the summer benefiting mainly when something went wrong on the U.S. side.
Today’s data are different.
The mistake here would be ignoring Brent above $93. Europe remains exposed to energy imports, and another oil acceleration could quickly damage this improving growth story.
For now, risks lean toward relative EUR strength. That tilt weakens if energy becomes the dominant story again.
🔺 GBP - Services resilience is more important than one soft retail month
GBP/USD is around 1.3650 to 1.3660, keeping sterling close to its strongest level since February.
Retail sales fell 0.5% in July, but I would not make that the entire GBP story. June was unusually strong, and today’s services PMI showed the wider economy accelerating instead of slowing.
Services reached 52.8 and business optimism improved.
That gives the Bank of England a reason to remain cautious while inflation is still uncomfortable.
Risks lean toward relative GBP strength, but I would keep an eye on the gap between market expectations and the economic consensus around future BoE policy. If growth or inflation starts cooling more quickly, some of the rate support currently priced into sterling can disappear.
🔺 CAD - Oil and domestic resilience still work in its favour
USD/CAD has recently traded around 1.38, with CAD close to its strongest area in almost three months.
The currency has a fairly useful combination right now.
Canadian employment has been strong. Brent is above $93. The immediate U.S.-Canada tariff threat has eased while negotiations continue.
Today’s retail-sales report is the missing consumer piece.
If household spending holds up, CAD has a broader domestic argument rather than depending on crude alone.
Risks lean toward strength while oil and Canadian activity remain relatively firm.
That tilt weakens if expensive energy turns from a terms-of-trade benefit into a broader global growth shock.
🔺 CHF - Fiscal uncertainty gives the haven story another angle
USD/CHF is around 0.80, with the franc recording one of its strongest weeks against USD this year.
The interesting part is that this is not only traditional geopolitical haven demand.
Markets are also questioning the U.S. fiscal and Treasury story, which weakens the dollar’s normal advantage during uncertain periods.
CHF still has a much lower yield profile, so I would not ignore that limitation.
But risks lean toward relative strength while concerns around U.S. debt, Gulf geopolitics and global bond volatility remain elevated.
⚖️ JPY - Better Japan data meet the same old yield problem
USD/JPY is around 158.8 to 159.0.
Japan delivered decent news this morning.
Core inflation was broadly in line with expectations, manufacturing activity accelerated sharply and new factory orders increased at their fastest pace in years. Markets already expect the BOJ to continue normalising policy.
And yet the yen is still struggling to move decisively.
That tells us the U.S. yield gap remains powerful.
The cleaner read for me is mixed.
JPY has more policy support than it did earlier this summer, and intervention risk remains important around 160. But markets probably need the BOJ to become more explicit about the pace of future tightening before the yen develops a cleaner independent strength story.
🔻 AUD - Softer employment damaged the domestic rate argument
AUD is benefiting from broad dollar weakness, but Australia’s own macro story became less supportive this week.
Employment fell, unemployment rose to 4.5%, hours worked declined and wage growth has been gradually cooling. That makes it harder for the RBA to justify another near-term policy move even while inflation remains above target.
The weaker dollar is providing a cushion.
Still, risks lean toward relative AUD weakness compared with currencies such as EUR, GBP and CAD that currently have stronger domestic support.
The RBA minutes next week will be useful, but they describe a meeting held before this week’s weak labour report.
🔻 NZD - External support is still doing most of the work
NZD is also benefiting from the broad decline in USD, but I still do not see a particularly strong New Zealand-specific story underneath it.
Unemployment has risen, wage pressure has softened and the domestic labour market carries more slack than Australia’s.
China’s manufacturing and technology demand help the external side, but Chinese household demand remains uneven.
Risks lean toward relative weakness.
A softer dollar and calmer global yields can support NZD generally, but the currency needs a stronger domestic policy or growth argument before the picture becomes cleaner.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,590 to $4,600, after reaching approximately $4,601, its highest level in nearly three months. Dollar weakness and concern around U.S. fiscal credibility are driving the latest leg higher, while elevated real yields remain the obvious counterweight. Watch next Wednesday’s core PCE data and Jackson Hole for whether the Fed reinforces or challenges the current fiscal-and-dollar narrative. [USD] [REAL YIELDS] [FISCAL RISK]
- 🥈 Silver: XAG/USD is trading around $69.50 to $70.00, rising sharply alongside gold and approaching another important psychological area. The weaker dollar and precious-metals demand are supportive, while stronger Japanese and euro-area manufacturing data improve the industrial-demand side as well. Watch whether today’s U.S. PMIs confirm that global manufacturing resilience is broad rather than concentrated in Europe and Japan. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $93 to $94 per barrel, close to a one-month high and more than 5% higher across the week. The U.S.-Iran deadlock, threats of additional sanctions and continued disruption around Hormuz are keeping supply risk elevated, while weaker global demand limits the move compared with July. Watch physical shipping flows and whether diplomatic pressure becomes economic escalation over the weekend. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: S&P 500 futures are up roughly 0.3% and Nasdaq futures around 0.5% this morning, attempting a rebound after Thursday’s decline. Global equities are still heading for their weakest week since mid-July as high bond yields, expensive oil and questions around AI financing pressure valuations. Watch Nvidia next Wednesday because the earnings and outlook will test whether enormous AI spending is still producing enough growth to justify the financing behind it. [TECHNOLOGY] [YIELDS] [EARNINGS]
- ₿ Crypto: Bitcoin is trading around $76,000 to $76,500, at its highest area in more than two months and up close to 20% this week. Dollar weakness, U.S. fiscal concerns and improved crypto-specific sentiment are supporting the move, even while real yields remain unusually high. Watch whether Bitcoin keeps behaving as an alternative to U.S. assets or reconnects with high-beta technology risk when Jackson Hole takes over next week. [LIQUIDITY] [FISCAL RISK] [RISK]
The main thing I care about today is that high Treasury yields are no longer automatically helping the dollar.
That is a meaningful change.
Earlier this year, the framework was easy.
U.S. yields move higher.
The dollar gets stronger.
Rate-sensitive assets struggle.
Today, the 10-year is still around 4.7%, the 30-year is around 5.25%, and the dollar index is sitting near a three-month low.
So something else has entered the equation.
For me, that something is confidence.
Markets understand why the Fed may stay patient. Employment weakened. Inflation improved. Retail spending softened.
But long-term yields are high for another reason.
Government debt has crossed $40 trillion. Interest costs are huge. The fiscal deficit remains large. Treasury officials are trying to calm the long end through larger debt repurchases.
That does not automatically make investors more comfortable.
The mistake here would be seeing high yields and assuming the market is simply becoming more hawkish on the Fed.
It is not.
Part of the rise in yields is a fiscal premium.
And a fiscal premium does not necessarily strengthen the currency in the same way as a clean monetary-policy advantage.
That is why gold is above $4,600.
That is why Bitcoin is above $76,000.
That is why EUR/USD has reached 1.17 even though U.S. yields remain high.
There is another important shift today.
Europe and the UK are no longer simply waiting for the United States to weaken.
Euro-area manufacturing is improving properly. UK services remain resilient. Japan’s private sector is strengthening as well.
That gives those currencies more independent macro information to work with.
AUD and NZD are different.
Australia’s employment report weakened the RBA argument, while New Zealand already has more labour-market slack. A soft dollar helps both, but the domestic support underneath them is not as strong.
JPY remains the frustrating one.
Japan’s macro picture is improving and markets expect more BOJ normalisation, but the yield difference with the United States remains large enough to keep USD/JPY near 159.
I would not overcomplicate next week either.
The main event is not one small data release.
It is the combination of U.S. GDP, core PCE, Nvidia and Jackson Hole.
GDP tells us how much the economy slowed.
PCE tells us whether the inflation problem is still alive.
Nvidia tells us whether the AI investment story can justify the amount of money being committed to it.
Jackson Hole tells us how the Fed thinks about all of that while the bond market is already questioning fiscal credibility.
My actual view heading into the weekend is that dollar risks still lean toward weakness.
But it is no longer only because the Fed looks less aggressive.
The market is questioning the wider U.S. asset story.
That is a bigger issue, and it is the part I would not misunderstand going into next week.
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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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