Good morning traders from a mostly cloudy Amsterdam, where it is around 18°C near IntelliTrade HQ before brighter conditions take temperatures toward 21°C this afternoon. Coffee is poured, the screens have calmed down slightly, and oil has pulled back from its latest spike. The problem is that the inflation risk behind that move has not disappeared.
Overall Market Sentiment:
The mood is cautious, but calmer than yesterday. Oil has eased on fresh hopes of a temporary ceasefire in the Middle East, and that has helped Asian technology shares recover after several ugly sessions.
I would not call this clean risk-on. Bond yields remain elevated, the dollar is sitting near a one-week high and the geopolitical story can turn again with one headline. The cleaner read for me is that markets are taking some risk back because oil has cooled, not because the wider inflation problem has been solved.
Geopolitics:
Iran has received a proposal for a temporary ceasefire, giving markets a reason to reduce part of the latest oil risk premium. At the same time, the threat of a naval blockade involving Saudi Arabia keeps supply routes and regional energy infrastructure in focus.
That matters because traders have already been disappointed by earlier attempts at de-escalation. The mistake here would be treating today’s oil decline as proof that the geopolitical story is finished.
Macro Calendar:
Today
- UK labour data: Regular wage growth held at 3.4%, unemployment remained at 4.9% and private-sector pay growth slowed further. That reduces some of the wage-inflation pressure facing the Bank of England, but tomorrow’s CPI report is still the bigger test for sterling.
- New Zealand inflation: Quarterly inflation rose 1.5%, taking the annual rate to 4.1%, its highest in more than two years. Fuel was a major driver, while softer domestic inflation underneath the headline makes the RBNZ interpretation less straightforward.
- German and euro-area ZEW sentiment: The surveys will show whether rising energy costs and geopolitical uncertainty are damaging expectations for the European recovery. The details matter ahead of Thursday’s ECB meeting.
The rest of this week
- Wednesday, UK CPI: Services inflation and underlying price pressure will matter more than a small move in the headline rate. Sterling needs to see whether softer wage pressure is being confirmed by the inflation data.
- Thursday, ECB decision: Rates are expected to remain unchanged, so the real event is the message. Markets are watching how the ECB balances weak growth, softer underlying inflation and the renewed energy shock.
- Thursday, Australian employment: The labour market remains central to the RBA outlook. A resilient report would preserve AUD’s domestic rate support, while weaker employment would leave it more dependent on China and global sentiment.
- Friday, Japanese CPI and global flash PMIs: Japan’s inflation report matters for the Bank of Japan and the yen’s yield disadvantage. The PMIs will show whether expensive energy is already affecting business activity, hiring and pricing across the major economies.
Currency Outlooks:
⚖️ USD - The dollar is firm, but the support is coming from two different stories
The dollar index is holding around 100.9 after reaching its strongest area in roughly a week. U.S. Treasury yields remain elevated, with the 10-year yield close to 4.6%, as markets consider whether expensive energy could rebuild inflation pressure later in the year.
At the same time, the dollar still has a defensive role. Middle East uncertainty and volatility in technology shares have prevented last week’s softer U.S. inflation data from producing broad and consistent USD weakness.
The cleaner read for me is that risks remain mixed. Softer CPI and PPI weakened the immediate Fed argument, but oil has strengthened the longer-term inflation argument. The dollar bias weakens if energy continues falling and yields move lower with it.
⚖️ EUR - ECB week is really about oil and policy credibility
EUR/USD is trading around 1.1420, holding relatively steady despite the dollar’s firmer tone. That is a decent performance, but I would not describe the euro as having a clean strength story.
Europe remains sensitive to imported energy costs. A sustained oil shock can weaken household demand, damage business confidence and still leave the ECB worried about inflation. That combination is uncomfortable for EUR.
Thursday’s meeting matters because the ECB needs to explain which risk it fears more. For now, falling oil provides some relief, but the euro’s bias remains balanced until the policy message becomes clearer.
⚖️ GBP - Softer wage pressure meets tomorrow’s inflation test
GBP/USD is holding around 1.3440 to 1.3450 after today’s labour data showed a weak but relatively stable employment picture. Regular wage growth stayed at 3.4%, while private-sector pay growth eased to its weakest pace in several years.
That should reduce some of the pressure on the Bank of England, but it does not settle the sterling story. Tomorrow’s inflation report is more important because services prices have been one of the main reasons policymakers remain cautious.
The pound can stay supported if inflation remains sticky without showing a sharper loss of growth momentum. Its bias weakens if wages and services inflation cool together.
🔻 CAD - Oil support is being challenged by tariff risk
CAD should normally benefit from oil trading near $89, but that relationship is being complicated by new U.S. tariffs on a wide range of Canadian products. The currency recently weakened toward a one-month low before stabilising.
That matters because Canada is dealing with a positive terms-of-trade effect from energy and a negative growth effect from trade restrictions at the same time. I would not overcomplicate this. Oil is helping, but it is no longer enough to create a clean CAD strength story.
Risks lean toward weakness while tariff uncertainty remains elevated. That tilt improves if oil stabilises and the trade dispute stops expanding.
⚖️ CHF - Still defensive, but ceasefire hopes limit urgency
The franc remains supported by geopolitical uncertainty, but today’s improvement in risk sentiment reduces the urgency for fresh defensive demand. Falling oil is also helping calm some of the inflation concern that supported safe-haven currencies earlier in the week.
CHF risks are balanced for now. Its defensive appeal strengthens again if ceasefire hopes fade or energy supply risks return quickly.
🔻 JPY - Higher yields keep the pressure in place
USD/JPY is holding around 162.5, leaving the yen close to its weakest levels in decades. The important point is that JPY has received very little relief even when the dollar has softened against other currencies.
Japan’s yield disadvantage is still the main issue. Rising Japanese bond yields have not been enough to close the gap with the United States, while markets are already looking toward next week’s Bank of Japan meeting.
The mistake here would be forgetting intervention risk. JPY risks still lean toward weakness, but the closer the exchange rate remains to extreme territory, the more sensitive it becomes to official comments or action.
⚖️ AUD - Technology rebound helps, but Thursday matters more
AUD/USD is trading around 0.7000 as the rebound in Asian technology shares and lower oil prices improve the immediate risk mood. That has allowed AUD to recover despite the dollar remaining relatively firm.
The currency now needs domestic confirmation from Thursday’s employment report. A resilient labour market would support the RBA’s cautious position. Weak hiring would make AUD more dependent on China, equities and general USD movement.
For now, the bias is balanced. Today’s improvement helps, but it still looks like relief rather than a major change in the macro story.
🔺 NZD - Strong headline inflation gives it a clearer domestic angle
NZD/USD has moved toward 0.5865, its strongest area since early June, after annual inflation accelerated to 4.1%. That headline supports expectations that the RBNZ may need to keep policy restrictive or consider further tightening later in the year.
The details are less aggressive than the headline suggests. Fuel prices created much of the increase, while domestic inflation pressure continued to cool.
Even so, NZD now has a clearer domestic source of support than AUD. Risks lean toward relative strength while the market focuses on the headline inflation surprise, but that view weakens if global risk sentiment deteriorates again.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading in the $4,050 to $4,075 area, rebounding from levels near $4,008 during Monday’s session. Physical demand and lingering geopolitical uncertainty are providing support, while a firm dollar and U.S. real yields remain the main constraints. Watch whether the 10-year Treasury yield stays near 4.6% or begins falling with oil. [USD] [REAL YIELDS] [GEOPOLITICS]
- 🥈 Silver: XAG/USD is trading around $58.50 to $59.00, recovering sharply after underperforming gold during the recent defensive move. A softer oil tone and stronger Asian technology shares are improving the industrial-demand mood, while the dollar and bond yields remain important headwinds. Watch whether silver can maintain its rebound if global PMIs point to slower activity later this week. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $88.50 to $89.25 per barrel, retreating from its latest six-week high as markets respond to hopes for a temporary ceasefire. The ceasefire proposal is reducing part of the geopolitical premium, but threats to shipping routes and regional supply infrastructure are keeping volatility elevated. Watch whether physical tanker activity improves or the latest diplomatic attempt loses momentum. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Asian equities have rebounded, with the regional index outside Japan gaining more than 2%, Japan’s Nikkei rising close to 3% and South Korea’s KOSPI jumping roughly 4.5%. Lower oil prices and relief around the Middle East have supported the recovery, while technology earnings and questions about AI valuations remain the main tests. Watch whether the rebound broadens beyond semiconductor shares or fades when European and U.S. markets take over. [TECHNOLOGY] [EARNINGS] [RISK]
- ₿ Crypto: Bitcoin is trading near $66,100, after moving between roughly $63,900 and $66,200 during the session. Improved risk appetite and stronger technology shares are helping, while elevated real yields and a firm dollar continue to limit the liquidity story. Watch whether Bitcoin holds the upper part of today’s range if bond yields remain high. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is whether the oil decline lasts.
Markets are behaving as though a ceasefire could remove part of the inflation risk, support equities and stop the dollar from extending its latest advance. That makes sense for now, but the geopolitical process is still fragile.
The mistake here would be confusing a relief move with a finished story. Oil is lower, but it remains expensive. The dollar is firm, but it is not breaking higher across every major currency. Equities are recovering, but the technology sector still has a lot to prove through earnings.
I would not overcomplicate this. Watch oil and Treasury yields together. If both move lower, the market can return to the softer inflation story from last week. If oil rebounds and yields remain elevated, the dollar’s support becomes much harder to ignore.
Want to turn this market context into a trading plan?
Check today’s Currency Strength Meter and Economic Calendar inside IntelliTrade Pro.
This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.
Need help decoding this article? Get our free Macro Decoder ebook when signing up to our newsletter using the sign up button below! No spam, just value.