Good morning traders from a sunny 17°C Amsterdam, where it is a fresh start around IntelliTrade HQ before the heat builds properly and temperatures push into the low 30s later this afternoon. Coffee is definitely still acceptable for now. On the screens, yesterday’s CPI has taken some pressure off the Fed, Asian equities are stronger, gold is sitting near a two-month high, and USD/JPY is somehow back near 160 again. That last part is probably the one I would not ignore.
Overall Market Sentiment:
The mood is calmer and mildly risk-on.
Yesterday’s U.S. inflation report did what the market needed it to do. July consumer prices rose only 0.1%, annual inflation eased to 3.4%, and expectations for another Fed increase in September dropped noticeably. Asian equities have responded well this morning, particularly technology shares.
But I would not call this a full macro green light.
The U.S. 10-year yield is still close to 4.7%, Brent remains near $88 despite easing today, and USD/JPY is sitting around 159.3 after authorities already showed last month that they are uncomfortable with extreme yen weakness.
My actual view today is that the dollar has lost another piece of its policy support, but it has not entered a clean decline. PPI still matters this afternoon, oil is still expensive, and the long end of the Treasury market remains much firmer than the Fed repricing would suggest.
The mistake here would be assuming one softer CPI report automatically solves the inflation problem.
Geopolitics:
U.S.-Iran negotiations remain stuck, with no clear timetable for implementing a longer-term agreement around the Gulf conflict and the Strait of Hormuz.
Oil is slightly softer this morning, but that is being driven as much by weaker demand expectations and a huge rise in U.S. inventories as by any improvement in geopolitics.
That distinction matters.
If crude is falling because supply risk is disappearing, that is clean inflation relief. If crude is falling because global demand expectations are deteriorating, the FX implications are much less comfortable.
For now, the geopolitical premium is smaller than it was in July, but it has not disappeared.
Macro Calendar:
Today
- UK GDP: The British economy expanded 0.4% in the second quarter, slowing from 0.6% in Q1 but still showing decent resilience. Services grew 0.5%, construction expanded modestly and production was flat. For GBP, that is better than a weak-growth scare, but it is not strong enough to make the Bank of England’s inflation problem easy.
- Euro-area industrial production: Europe’s industrial side remains the weak point in the regional recovery. I would focus on whether manufacturing activity is stabilising now that energy prices are below July’s extremes.
- U.S. PPI, 14:30 Amsterdam time: This is today’s main dollar event. CPI reduced the pressure on the Fed, so producer prices now need to show that tariff costs, supply disruption and business input inflation are not quietly rebuilding underneath the consumer numbers.
- U.S. jobless claims, 14:30 Amsterdam time: After July payrolls fell, every labour-market release carries more weight. The key question is whether companies are simply hiring less or whether layoffs are starting to increase as well.
The rest of this week
- Friday, U.S. retail sales: This number matters more after the weak employment report. If consumers keep spending despite slower hiring, the U.S. growth story remains relatively resilient. If spending weakens too, the Fed has a much harder growth problem to ignore.
- Friday, U.S. consumer sentiment: The headline matters, but inflation expectations are the cleaner read for me. Oil is still elevated and households remain sensitive to the cost of living, so this can show whether yesterday’s softer CPI is actually changing how consumers feel about future prices.
Currency Outlooks:
🔻 USD - CPI weakened the rate story, but PPI still gets a vote
The dollar index is holding around 99.9 to 100.0, with EUR/USD near 1.1525 and GBP/USD around 1.3490.
Yesterday’s CPI reduced the probability of another September Fed increase to roughly 40%, down from more than 50% a week ago. Combined with last Friday’s weak payroll report, that is a meaningful change.
The Fed now has evidence that employment is cooling and headline inflation is moving in the right direction.
That is why I see dollar risks leaning softer.
But the move is still not completely clean. The U.S. 10-year yield remains near 4.69%, which tells us the bond market is not exactly celebrating the end of inflation risk. PPI can also show something different from CPI if tariff costs and supply pressure are still building at company level.
The cleaner read for me is that USD has lost short-term policy momentum. The bias weakens if PPI is firm enough to push yields higher again.
⚖️ EUR - Dollar relief helps, but Europe still has an oil problem
EUR/USD is trading around 1.1525, holding close to the upper end of its recent range without extending much after the U.S. CPI release.
That tells me the euro is benefiting from reduced Fed pressure, but it still lacks a really strong domestic reason to accelerate.
Brent near $88 remains uncomfortable for Europe. It is far better than the $100-plus levels we saw in July, but Europe is still a major energy importer and industrial growth remains uneven.
I would not overcomplicate this. EUR has a better environment when U.S. yields stop rising and oil stays contained. It has both of those things partially today, not completely.
Risks remain balanced with a mild positive tilt. That improves if U.S. PPI cools and European industrial data stabilise.
🔺 GBP - GDP gives sterling a useful bit of confirmation
GBP/USD is around 1.3490, holding close to its recent one-month high after this morning’s UK growth report.
Second-quarter GDP grew 0.4%, which is slower than Q1 but still respectable considering restrictive interest rates, expensive energy and softer global demand. Services remained the main engine, while business investment also held up reasonably well.
That matters because sterling has spent several weeks benefiting from a Bank of England that remains cautious about inflation. Today’s GDP report says the economy has not completely buckled under that policy stance.
The cleaner read for me is modestly constructive.
The mistake here would be turning 0.4% growth into a boom story. It is not. GBP’s advantage still depends on growth remaining stable enough for the BoE to stay patient without becoming worried about recession.
Risks lean toward relative strength for now.
🔺 CAD - The domestic story is finally doing some of the work
CAD remains near its strongest area in roughly two months, with USD/CAD recently holding around the 1.39 region.
Canada’s strong employment report last week changed the story. The currency no longer needs Brent above $100 to create support because the labour market has provided a domestic reason as well.
Oil around $88 still helps, although today’s decline is a reminder that the demand side is becoming more complicated. Large U.S. inventories and weaker global consumption forecasts are limiting the commodity argument.
Risks still lean toward relative CAD strength, but I would separate supply-driven oil support from demand-driven oil weakness.
That distinction could matter more over the next couple of weeks.
⚖️ CHF - The haven story is quieter while equities recover
The franc is getting less attention this morning because Asian equities are stronger and yesterday’s CPI reduced some of the immediate Fed uncertainty.
That does not remove CHF’s defensive role. Middle East risk remains unresolved and the U.S. bond market is still volatile.
The problem against USD is still the yield gap.
CHF risks remain balanced. The defensive case becomes stronger if PPI brings inflation concerns back or if the equity rally starts losing breadth.
🔺 JPY - The BOJ story finally has more behind it
USD/JPY is trading around 159.3, still dangerously close to 160 despite last month’s coordinated intervention.
At first glance, that looks terrible for the yen.
But today’s domestic inflation data add a new piece to the story. Japanese wholesale prices rose 7.2% year-on-year in July, reinforcing expectations that the Bank of Japan could tighten again sooner than markets previously thought.
This is important because JPY now has more than intervention working in its favour.
The Fed side has softened after weak jobs and calmer CPI. The BOJ side is becoming more inflation-sensitive. That narrows the policy argument from both directions.
The mistake here would be assuming that means USD/JPY has to fall immediately. The yield gap remains large and 159 is proof of how powerful it still is.
Risks lean modestly toward JPY strength from here, but volatility around 160 remains extremely high because policy expectations and intervention sensitivity are colliding in the same area.
🔺 AUD - The RBA is still not comfortable with inflation
AUD/USD is holding around 0.7050 to 0.7060, not far below Wednesday’s 10-week high.
The RBA held rates this week, but policymakers continue to make clear that inflation risks remain tilted upward. Further tightening is still part of the discussion if domestic pressure refuses to cool.
That preserves AUD’s relative rate support.
At the same time, the RBA is acknowledging that previous increases are slowing spending and activity. So this is not a simple strong-economy story.
Risks lean modestly toward strength while the RBA remains more inflation-sensitive and U.S. Fed expectations cool. The bias weakens if China and global growth become the dominant concern.
🔻 NZD - Inflation expectations take another piece out of the rate story
NZD/USD has slipped toward 0.5830, underperforming AUD this morning.
That divergence makes sense.
New Zealand unemployment has already risen, wage pressure is softer, and the latest inflation-expectations reading has reduced the argument for aggressive RBNZ tightening even further.
That matters because NZD cannot rely indefinitely on a softer U.S. dollar when its own domestic policy story is weakening.
Risks lean toward relative weakness.
The cleaner read for me is that AUD currently has the stronger domestic rate foundation, while NZD needs a better growth or inflation argument before that gap narrows.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,410 to $4,420, holding close to its highest level in more than two months after yesterday’s softer U.S. inflation report. Lower near-term Fed expectations are supporting the metal, while the U.S. 10-year yield near 4.69% is preventing the real-yield story from becoming completely one-sided. Watch whether PPI confirms CPI and pulls yields lower rather than simply shifting inflation pressure further up the supply chain. [USD] [REAL YIELDS] [PPI]
- 🥈 Silver: XAG/USD is trading around $65.45 to $65.50, near its strongest area since late June and broadly tracking gold’s recent strength. Lower Fed expectations and USD uncertainty are supportive, while strong semiconductor equities are helping the industrial-demand side of the story. Watch whether silver continues outperforming if technology sentiment stays firm and U.S. yields remain contained. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $88.30 to $88.60 per barrel, easing after six sessions of gains but remaining well above last week’s lows. U.S.-Iran deadlock is keeping supply risk underneath the market, while a 17.4 million-barrel rise in U.S. crude inventories and weaker global demand forecasts are pushing the other way. Watch whether physical supply fears or the weaker demand outlook becomes the dominant driver from here. [SUPPLY] [GEOPOLITICS] [DEMAND]
- 📈 Stocks: Asian equities are stronger, with the regional index outside Japan up roughly 1%, South Korea gaining more than 4% and Japan’s Nikkei rising close to 2%, while U.S. futures are roughly flat. Softer Fed expectations and renewed confidence in semiconductor demand are supporting risk appetite, although high bond yields and expensive valuations remain constraints. Watch whether today’s PPI keeps the rates story friendly enough for the rally to broaden beyond chips and AI-linked names. [TECHNOLOGY] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around $63,800 to $64,000, edging higher but still showing a much quieter response to softer inflation than gold or major equity markets. Reduced Fed pressure helps liquidity conditions, while elevated real yields continue limiting the move. Watch whether PPI and Friday’s retail-sales data finally create a stronger shift in real yields and broader risk appetite. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is that yesterday’s CPI did not create a big dollar collapse.
I think that tells us something.
The inflation number was friendly enough to reduce September Fed expectations. The labour market is already softer. On paper, that should be a pretty decent combination for a weaker dollar.
Yet the dollar index is still around 100, the 10-year yield is still near 4.7% and USD/JPY is back near 160.
So what is the market telling us?
For me, it is saying the Fed story has softened, but the wider U.S. yield and inflation story has not disappeared.
That is why PPI matters today.
If producer inflation also cools, it becomes harder to argue that inflation pressure is simply hiding somewhere else in the system. The Fed then has two pieces pointing toward patience: weaker employment and moderating prices.
If PPI is firm, markets can say yesterday’s CPI looked better at consumer level while corporate cost pressure remains uncomfortable underneath.
That keeps the argument alive.
The other thing I would not misunderstand is the yen.
USD/JPY near 160 looks similar to July on the screen, but the environment is not identical.
Authorities have already intervened. Japanese wholesale inflation is running above 7%. Markets are bringing forward the possibility of another BOJ move. At the same time, Fed expectations have become less aggressive.
The yield gap is still powerful enough to keep JPY under pressure, but the forces pushing against that weakness are stronger now.
GBP also looks more interesting after today’s GDP numbers. Growth is not spectacular, but 0.4% is enough to say the UK economy is still functioning under restrictive policy. CAD still has strong labour data behind it. AUD retains RBA support. NZD is the currency where the domestic rate argument is clearly becoming softer.
So my actual view today is fairly straightforward.
USD risks have shifted mildly toward weakness after CPI, but I want PPI to confirm that inflation pressure is actually moderating across the system.
EUR is supported without having a particularly strong European story. GBP has received useful growth confirmation. CAD and AUD still have decent domestic foundations. JPY has a better macro argument than its current level suggests, although the yield gap remains a major problem.
The mistake here would be treating yesterday as the final inflation verdict.
It was one useful piece.
Today tells us whether the pipeline agrees.
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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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