Good morning traders from a mostly cloudy 18°C Amsterdam, where it is a mild start around IntelliTrade HQ before temperatures push toward 21°C this afternoon. Coffee is settled at the IntelliTrade desk, the dollar is sitting at its weakest area in more than two months, gold is back around $4,400, and markets have spent the weekend becoming even less convinced that the Fed needs to move again in September. The interesting part is that long-term Treasury yields are not falling nearly as aggressively as the dollar.
Overall Market Sentiment:
The mood is cautiously risk-on.
The dollar is softer, global equities are mostly firmer and markets have cut the probability of another Fed increase in September to around 30%. Friday’s weak retail sales added to the same story we have been building for two weeks now: jobs are softer, inflation has cooled and household demand is beginning to look less convincing.
But I would not call this a clean dovish market.
The U.S. 10-year yield is still around 4.68%. Brent is still close to $89. The Strait of Hormuz situation remains unresolved. So my actual view today is that USD risks lean weaker, but the move should remain selective until the long end of the Treasury market joins the Fed repricing.
The mistake here would be assuming a lower probability of a September increase automatically means a collapsing dollar.
It does not.
Geopolitics:
Middle East risk remains in the background, with no durable resolution around Iran or the Strait of Hormuz and regional oil flows still below normal levels. Brent has held in the upper $80s after gaining roughly 6% last week.
That matters because oil is preventing central banks from becoming completely relaxed about the inflation outlook. The geopolitical premium is smaller than it was when Brent traded above $100, but it is still large enough to matter for Europe, Japan and global bond yields.
Macro Calendar:
Today
- Japan Q2 GDP: The Japanese economy expanded 0.3% quarter-on-quarter, or 1.1% annualised, during the second quarter. The important detail is that domestic demand was soft while net exports did more of the work, which makes the case for aggressive BOJ tightening less straightforward even as inflation remains uncomfortable.
- China activity data: July industrial output grew 4.5% year-on-year, while retail sales increased only 0.6%. That is a reminder that the export and AI-related parts of China’s economy can look much healthier than domestic consumption, which matters particularly for AUD and NZD.
- Canadian CPI, 14:30 Amsterdam time: Canada’s inflation rate cooled to 2.8% in June after the earlier energy spike. Today’s July report matters because CAD already has strong employment and relatively firm oil behind it. The missing piece is whether inflation gives the Bank of Canada another reason to stay cautious.
The rest of this week
- Tuesday, UK labour data: Sterling gets its first major domestic test. Wage growth and unemployment will show whether the BoE’s inflation concern still has a labour-market foundation after relatively resilient UK growth.
- Wednesday, UK CPI and Australian wages: UK inflation could decide whether GBP keeps its relative rate advantage. Australia’s Wage Price Index will meanwhile show whether domestic wage pressure remains strong enough to justify the RBA’s firm inflation stance.
- Wednesday, Fed minutes: The July meeting minutes arrive at 20:00 Amsterdam time. I care less about whether the document sounds technically hawkish or dovish and more about what policymakers were worried about before jobs, CPI, PPI and retail sales all weakened afterward.
- Thursday, Australian employment: This is the second half of the AUD domestic test. Resilient jobs would keep the RBA’s policy argument intact, while deterioration would make last week’s unchanged decision look more like the beginning of patience.
- Friday, Japanese CPI and global flash PMIs: Japanese inflation is important with USD/JPY still around intervention-sensitive territory. The PMIs will then give us the first broad look at August growth, hiring and prices across Europe, the UK, Japan and the United States.
Currency Outlooks:
🔻 USD - The Fed argument is weakening faster than long yields
The dollar index is around 99.3 to 99.5, its weakest area since early June. EUR/USD has reached roughly 1.1610, while USD/JPY has eased toward 159.0.
The short-term dollar story has changed quite a bit.
Payrolls disappointed. CPI cooled. PPI was flat. Retail sales fell. Consumer confidence softened. Markets now see only around a 30% probability of another Fed increase next month, compared with roughly 50% a week ago.
That is real.
But the 10-year Treasury yield is still near 4.68%.
That matters because the Fed controls the short end more directly than the long end. Longer-term yields are still carrying concerns about inflation, oil, fiscal risk and the amount of compensation investors want for holding U.S. debt.
The cleaner read for me is that USD risks lean toward weakness, especially against currencies with their own policy support.
The bias weakens if long-term yields start climbing again even while Fed expectations fall.
🔺 EUR - Two-month highs, but the story is still relative
EUR/USD has pushed toward 1.1610, its strongest area in roughly two months.
The euro is benefiting from something it needed badly: a narrower relative policy gap with the United States. The market no longer sees the Fed as clearly moving toward further restriction while the ECB waits.
Lower U.S. short-term yields help. The problem remains oil.
Brent near $89 is still uncomfortable for an energy-importing region, particularly when European industrial growth remains uneven.
Risks lean toward relative strength while U.S. policy expectations keep cooling. I would not mistake that for a booming European macro story. EUR is improving because the environment around it has become less hostile.
🔺 GBP - Sterling now gets the domestic confirmation test
GBP/USD is around the mid-1.35 area, near multi-month highs after a stronger run over the past couple of weeks.
Sterling has a fairly useful combination right now. UK growth has held up better than feared, the Bank of England remains sensitive to inflation and U.S. rate expectations are moving lower.
Now wages and CPI need to confirm it.
Tuesday and Wednesday matter much more for GBP than today’s general dollar decline.
If wages remain sticky and inflation stays uncomfortable, sterling keeps its relative policy support. If both cool quickly, the BoE’s advantage becomes less convincing.
Risks lean toward strength for now, but this is one of the views that can change quickly this week.
🔺 CAD - CPI decides whether strong jobs get a policy partner
CAD reached its strongest area in roughly two months last week, with USD/CAD around the high-1.38 region.
That move was not only about crude.
Canada recently delivered a strong employment surprise, unemployment fell and the U.S.-Canada yield gap narrowed. Brent near $89 adds another layer of support.
Today’s CPI is therefore interesting because Canada could end up with strong labour data, expensive oil and persistent inflation at the same time.
That would make the Bank of Canada’s job less comfortable.
For now, risks lean toward CAD strength, but the cleaner read comes after inflation. A sharp cooling in underlying prices would weaken the policy part of the story even if the growth backdrop remains better.
⚖️ CHF - Dollar weakness helps, but risk appetite limits the haven move
USD/CHF is around 0.81, with the franc receiving some support from the broader decline in USD.
At the same time, global equities are mostly firmer and markets are reducing near-term Fed risk. That lowers the urgency for traditional defensive demand.
CHF still has Middle East uncertainty underneath it, but the yield gap remains a limitation against the dollar.
Risks stay balanced.
The franc becomes more relevant if PMIs later this week point toward a sharper global slowdown or geopolitical risk starts hitting equities again.
🔺 JPY - The dollar side is finally helping, but Japan’s GDP was not impressive
USD/JPY is around 159, down modestly this morning but still uncomfortably close to the 160 region.
This is where I think the yen story has become more interesting.
The U.S. side is finally moving in JPY’s favour. Fed tightening expectations are fading and shorter-dated Treasury yields have come down.
Japan’s own side is less clean.
GDP expanded 0.3% in Q2, but domestic demand was weak. That makes it harder for the BOJ to justify moving aggressively based on growth alone.
Then we have Friday’s CPI.
If inflation remains firm while the Fed argument keeps weakening, the rate-gap story can finally narrow from both sides. Add the threat of further official intervention and risks lean toward JPY strength.
The mistake here would be assuming 159 is just another FX level. Around 160, macro, BOJ expectations and government intervention sensitivity all start overlapping.
🔺 AUD - External weakness in USD is helping more than China
AUD/USD has reached around 0.7105, its strongest area in roughly 10 weeks.
The softer dollar is doing a lot of the work, while the RBA’s refusal to declare victory on inflation is providing a useful domestic foundation.
China is the less comfortable part.
Industrial production is still expanding, but retail activity remains extremely soft. That makes the Australian story more dependent on external demand and technology-related investment than broad Chinese household strength.
Wednesday’s wages and Thursday’s employment report can give AUD something more domestic.
Risks lean toward strength while the RBA remains firmer than the Fed outlook. That tilt weakens if Australian labour data show that restrictive policy is biting harder than expected.
⚖️ NZD - Ten-week highs hide a softer domestic foundation
NZD/USD has reached roughly 0.5910, also around a 10-week high as the dollar weakens.
That looks constructive on the chart, but I would separate price performance from the domestic story.
New Zealand unemployment has risen, wage pressure has cooled and the labour market is carrying more slack. The RBNZ still has an inflation issue, but the case for aggressive restriction is less clean than Australia’s.
China’s weak consumer data are another limitation.
So the cleaner read for me is balanced. NZD benefits while the dollar falls and risk appetite holds up, but it has less independent policy support than AUD.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,395 to $4,405, up roughly 0.5% this morning and holding close to the more-than-two-month highs reached recently. A weaker dollar and fading Fed tightening expectations are the main support, while the U.S. 10-year yield near 4.68% is preventing the real-yield story from becoming completely clean. Watch whether Wednesday’s Fed minutes pull long-term yields toward the softer policy story already visible at the front of the curve. [USD] [REAL YIELDS] [FED]
- 🥈 Silver: XAG/USD is trading around $65.50 to $66.00, up roughly 1.5% and outperforming gold this morning. Dollar weakness and softer rate expectations are helping, while the industrial side is supported by technology demand but complicated by weak Chinese consumption and uneven global manufacturing. Watch Friday’s global PMIs for confirmation that industrial demand can hold up. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $88.20 to $88.80 per barrel, roughly flat after gaining about 6% last week. Restricted Middle East supply flows and the unresolved Iran-Hormuz situation are supporting crude, while softer global demand expectations are stopping another move toward July’s extremes. Watch physical shipping volumes and whether the current diplomatic deadlock worsens. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Global equities are modestly firmer, with the STOXX 600 up around 0.2%, Asia-Pacific shares outside Japan up roughly 0.5%, and S&P 500 and Nasdaq futures gaining about 0.2% and 0.5% respectively. Softer Fed expectations are supporting valuations, while weak consumption data and high long-term yields keep the growth story from becoming completely comfortable. Watch whether this week’s retailer earnings and Friday PMIs confirm that weaker U.S. data still look like policy relief rather than a deeper growth warning. [FED] [EARNINGS] [RISK]
- ₿ Crypto: Bitcoin is trading around $63,300, inside a current session range of roughly $62,700 to $63,600. The softer dollar and lower near-term Fed expectations improve the liquidity backdrop, but elevated real yields continue limiting the response compared with gold and equities. Watch whether Wednesday’s Fed minutes finally create a stronger move in longer-term yields. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is the gap between the dollar and the Treasury market.
The dollar is behaving like the Fed is becoming less important.
The long end is not.
The two-year yield is near a seven-week low. The probability of another September increase has dropped sharply. EUR, AUD and NZD are all trading around multi-week highs against USD.
Yet the U.S. 10-year is still sitting around 4.68%.
That is not a small detail.
It tells us that markets are becoming more relaxed about what the Fed does next month without becoming relaxed about inflation, fiscal risk or the longer-term cost of money.
That is why I would not overcomplicate the dollar weakness into a massive trend call.
The immediate USD policy advantage has weakened. That part is clear.
But currencies still need their own reason to benefit.
GBP has wages and inflation coming.
CAD has inflation today after strong employment.
AUD has wages and jobs after an RBA meeting that kept further restriction possible.
JPY has Friday inflation, rising BOJ expectations and intervention risk around 160.
NZD has the softer domestic labour story.
EUR has a weaker dollar helping, but still carries Europe’s energy sensitivity.
Those differences are where I think this week becomes useful.
The Fed minutes are also easy to misunderstand.
They describe a meeting that happened before payrolls disappointed, before CPI and PPI cooled and before retail sales fell.
So I would not read them like a fresh policy statement.
The useful question is what the Fed was worried about before the data weakened.
If the committee was already becoming more comfortable with inflation, the latest data reinforce that.
If policymakers were still deeply worried about energy, tariffs and underlying inflation, markets may have reduced September risk a little too quickly.
My actual view today is that USD risks lean toward weakness, but I want to see the 10-year yield start agreeing before calling the move broad and clean.
EUR, GBP and AUD currently have better relative support.
CAD has an important inflation test today.
JPY has probably the most asymmetric policy sensitivity because USD/JPY is back around an area authorities have already shown they dislike.
The mistake here would be assuming that softer Fed expectations mean every dollar pair should tell the same story.
They will not.
The Fed advantage is fading.
Now the rest of the currencies have to prove what they can do with it.
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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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