Good morning traders from a showery Amsterdam, where it is around 19°C near IntelliTrade HQ with some brighter spells trying to break through later. Coffee is on the desk, yesterday’s bond-market stress has eased slightly, the dollar is softer again, and tonight’s Fed minutes suddenly have a difficult job. Markets have already reduced September tightening expectations, but Brent is above $91 and the long end of the Treasury market is still nowhere near relaxed.
Overall Market Sentiment:
The mood is cautious and mixed.
The dollar is softer, gold has recovered and yesterday’s aggressive bond selloff has calmed down a little. But I would not call this risk-on. Long-term yields remain extremely high, technology shares are still struggling and Brent has climbed to a three-week high as the Strait of Hormuz situation refuses to improve.
My actual view today is that markets are increasingly comfortable with the idea that the Fed stays unchanged in September. What they are not comfortable with is the longer-term inflation and borrowing-cost picture.
That distinction matters.
The mistake here would be assuming a softer Fed automatically means easy financial conditions. When the 10-year yield is still around 4.7% and the 30-year is above 5.2%, the bond market is doing plenty of tightening on its own.
Geopolitics:
Brent is back above $91 as the U.S. and Iran continue giving completely different versions of what is happening around the Strait of Hormuz. The U.S. says the waterway is open. Iran says commercial access remains restricted. In reality, many shipowners are still avoiding the route.
That is the part markets care about.
Oil does not need to return to $100 to complicate inflation. Holding above $90 for long enough can already influence transport costs, household expectations and central-bank thinking.
I would not overcomplicate this. The Fed minutes describe a meeting held before some of the latest softer U.S. data. Oil above $91 describes the risk policymakers are looking at now.
Those are not the same story.
Macro Calendar:
Today
- UK CPI: Headline inflation increased to 2.9% in July from 2.6%, largely because of higher household energy costs. The more useful details were calmer: core inflation held at 2.6% and services inflation eased to 3.4% from 3.6%. That keeps the Bank of England cautious without giving it a clean domestic inflation problem.
- Australian wages: The Wage Price Index rose 0.8% quarter-on-quarter and 3.2% year-on-year. Private-sector annual wage growth slowed to 3.1%, while public wages rose 3.4%. For the RBA, that looks more like gradual cooling than a fresh wage-inflation shock.
- U.S. Treasury supply: The U.S. is selling another batch of long-dated debt today while the bond market is already nervous about inflation, government borrowing and fiscal sustainability. Demand matters because another poor reception would keep upward pressure on long-term yields even without a more aggressive Fed.
- Federal Reserve minutes, 20:00 Amsterdam time: This is today’s main event. The July decision included three votes for higher rates, but the minutes were written before payrolls weakened, CPI cooled, PPI came in flat and retail sales disappointed. The useful question is what policymakers were worried about before those softer numbers arrived.
The rest of this week
- Thursday, Australian employment: Today’s wage numbers were fairly calm. Tomorrow tells us whether the labour market is also losing momentum or remains tight enough to keep the RBA uncomfortable.
- Thursday, U.S. jobless claims and Philadelphia Fed: Claims have become more important after July payrolls declined. The cleaner question is whether companies are simply recruiting less or actually starting to reduce headcount more aggressively.
- Friday, Japanese CPI: This matters with USD/JPY still sitting close to 160 and Japanese bond yields around multi-decade highs. Strong inflation would increase pressure on the BOJ to back recent currency intervention with firmer monetary policy.
- Friday, global flash PMIs: These provide the first broad look at August growth, employment and prices. I care about the pricing components almost as much as activity because oil has moved sharply higher again.
Currency Outlooks:
🔻 USD - The dollar is softer, but the long end refuses to cooperate
The dollar index is around 99.4, with EUR/USD near 1.1610, GBP/USD around 1.3560 and USD/JPY close to 159.0.
The short-term Fed story clearly favours a softer dollar.
Jobs weakened. CPI improved. PPI was flat. Retail sales disappointed. Markets now see a much greater probability that the Fed stays unchanged in September.
That part is straightforward.
The problem is the bond market.
The U.S. 10-year yield remains around 4.70% and the 30-year is close to 5.28%. Those are not easy financial conditions. They also preserve a meaningful dollar yield advantage even while immediate Fed expectations cool.
The cleaner read for me is that USD risks lean toward weakness, but not uniformly.
That bias becomes much stronger if the Fed minutes sound relatively patient and long-term yields start falling. If yields stay near current levels, dollar weakness can remain frustratingly selective.
⚖️ EUR - Two-month highs meet another energy problem
EUR/USD is around 1.1610, keeping the euro near its strongest region in roughly two months.
Lower Fed expectations are helping. That has been the cleaner part of EUR’s recent improvement.
Then there is oil.
Brent above $91 is uncomfortable for Europe because the region still imports a large share of its energy. Higher crude raises business costs and weakens household purchasing power without creating stronger underlying demand.
That is why I would not call the euro genuinely strong yet.
The cleaner read is balanced with a mild positive tilt. EUR can continue benefiting while U.S. short-term rate expectations cool, but the advantage becomes less convincing if energy and European bond yields keep rising together.
⚖️ GBP - Headline inflation rose, but the details were calmer
GBP/USD is trading around 1.3560, holding close to recent highs after this morning’s UK CPI report.
The headline moved from 2.6% to 2.9%, which looks uncomfortable at first.
The details are more useful.
A lot of the increase came through household energy costs. Core inflation stayed at 2.6%, while services inflation actually cooled to 3.4%.
That matters because services and wages tell us much more about domestic inflation pressure than another energy shock does.
After yesterday’s softer labour report, I see GBP risks as balanced rather than clearly firm.
The pound still has some policy support, but the Bank of England is increasingly looking at softer wages and services inflation while headline energy costs move the other way.
That is not a simple hawkish story.
🔺 CAD - Oil helps while tariff pressure temporarily eases
USD/CAD is around 1.3870, leaving CAD close to its strongest region in several months.
The currency has a few useful things going for it.
Recent employment data were strong. Brent is above $91. And the latest U.S. tariff deadline on Canadian goods has been delayed while negotiations continue.
I would not treat the trade issue as solved. It is not.
But removing an immediate tariff shock while oil and domestic labour conditions remain supportive gives CAD one of the cleaner relative stories today.
Risks lean toward strength for now.
That tilt weakens if the trade talks fail or crude begins falling because global demand expectations deteriorate sharply.
⚖️ CHF - Defensive support remains, but the dollar’s yield is still difficult to beat
The franc has a reasonable defensive backdrop today.
Middle East tensions remain high, global bond markets are unstable and technology shares have been under pressure. Normally that should give CHF a fairly clean advantage.
The problem remains U.S. yields.
A dollar backed by a 10-year yield near 4.7% and a 30-year above 5.2% is difficult for another haven currency to outperform consistently.
Risks remain balanced.
CHF becomes more interesting if the bond-market stress turns into a wider equity and growth problem rather than simply higher inflation compensation.
🔺 JPY - Pressure remains, but the environment around 160 is getting dangerous
USD/JPY has eased toward 159.0, moving slightly further away from 160.
The yen still has problems. The U.S.-Japan rate gap is large, oil above $91 hurts an energy importer and Japan’s recent growth numbers were not strong enough to justify an aggressive BOJ path by themselves.
But the other side keeps getting more important.
Japanese government yields are around multi-decade highs. Markets are discussing further BOJ tightening. Friday brings CPI. And authorities have already demonstrated that they are willing to intervene when yen weakness becomes disorderly.
That is why risks lean modestly toward JPY strength from here.
Not because Japan suddenly has a perfect macro story. It does not.
The point is that the cost of pushing the yen much weaker is getting higher, both economically and politically.
⚖️ AUD - Wages cooled enough to make tomorrow’s jobs report more important
AUD remains close to recent multi-week highs, but today’s wage data did not give the currency a fresh reason to accelerate.
Wages grew 0.8% during the quarter and 3.2% annually. That is still respectable, but private-sector wage growth is slowing and overall wage gains are running below inflation.
For the RBA, that is useful.
It suggests labour costs are not suddenly creating another major inflation shock. But it also means tomorrow’s employment data matter much more if the central bank wants to maintain a firm policy stance.
The cleaner read for me is mixed.
AUD still has more domestic policy support than NZD, but it needs a resilient jobs report to keep that difference convincing.
🔻 NZD - Still relying too much on the external story
NZD remains supported by the softer U.S. dollar, but the domestic argument continues to look less convincing than Australia’s.
New Zealand unemployment has increased, wage pressure has cooled and labour-market slack has become more obvious.
That means NZD benefits when U.S. yields fall and global risk sentiment improves, but it has fewer independent reasons to outperform.
China’s uneven domestic economy is another complication.
Risks lean toward relative weakness, particularly against currencies where policy expectations still have stronger domestic support.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,365 to $4,380, recovering roughly 0.8% after dropping close to 2% during Tuesday’s global bond selloff. A softer dollar and slight easing in long-term yields are supporting the rebound, while the absolute level of real yields remains a major constraint. Watch whether tonight’s Fed minutes finally push the Treasury market toward the softer policy story already visible in FX. [USD] [REAL YIELDS] [FED]
- 🥈 Silver: XAG/USD is trading around $63.80, recovering modestly alongside gold after Tuesday’s sharp decline. Softer USD conditions are supportive, while elevated yields and renewed pressure across semiconductor shares are limiting the industrial-demand side. Watch Thursday’s Australian employment and Friday’s global PMIs for a cleaner read on manufacturing and growth. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $91.50 to $92.00 per barrel, its highest area in roughly three weeks and extending a fourth consecutive daily advance. Disrupted Hormuz traffic, reduced Russian shipments and the lack of progress between the U.S. and Iran are supporting the supply premium. Watch actual commercial shipping through the Strait rather than conflicting political claims about whether it is open. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: European shares are roughly flat around recent two-week lows, while U.S. index futures are also struggling for direction after another technology-led decline. Elevated long-term yields, concern around AI valuations and higher oil are limiting the benefit from softer Fed expectations. Watch whether the bond market stabilises enough for the pressure to remain concentrated in technology rather than spreading across the wider equity market. [TECHNOLOGY] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around $64,700 to $64,900, up roughly 1% today and holding better than several technology markets. A softer dollar provides some liquidity support, while elevated real yields and continued bond volatility are preventing a cleaner risk-on move. Watch whether the Fed minutes lower long-term yields or simply confirm the gap between softer Fed expectations and expensive market financing. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is that the bond market is starting to become its own macro driver.
For most of this year, the simple framework was Fed expectations move, Treasury yields follow, and the dollar responds.
That relationship is getting messier.
Markets are increasingly confident that the Fed stays unchanged in September.
Yet 10-year and 30-year yields remain extremely high.
Why?
Because investors are worrying about more than the next Fed meeting.
They are looking at oil above $91.
They are looking at government borrowing.
They are looking at fiscal sustainability.
They are looking at persistent inflation risk.
And they want more compensation for holding long-duration debt.
That matters for basically everything.
High long yields pressure technology valuations. They keep mortgages expensive. They tighten corporate financing conditions. They support the dollar even when the Fed itself looks less aggressive. And they create a headwind for gold despite a softer short-term policy outlook.
That is what traders should not misunderstand tonight.
The Fed minutes can sound cautious about further tightening and the dollar can still struggle to fall if the long end refuses to move.
I would not overcomplicate the UK data either.
Headline inflation rose, yes. But services inflation cooled and yesterday’s wage numbers were soft. The Bank of England is not suddenly facing a new domestic inflation boom. It is facing another energy shock layered on top of a labour market that is gradually losing pressure.
Australia looks similar in a different way. Wage growth remains firm enough to matter, but not firm enough to settle the RBA argument before tomorrow’s employment numbers.
JPY remains the currency I would treat most carefully around current levels. USD/JPY is close enough to 160 that every shift in Japanese inflation, bond yields and government language matters more than normal.
My actual view today is that dollar risks still lean softer because the Fed argument has genuinely weakened.
But I want the Treasury market to confirm it.
Until that happens, the cleaner story is not simply “weak dollar.”
It is softer Fed expectations fighting against high long-term yields, expensive oil and persistent geopolitical risk.
Tonight’s minutes tell us what the Fed was thinking.
The bond market tells us whether anyone cares.
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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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