Good morning traders from a sunny 18°C Amsterdam, where it is already a bright start around IntelliTrade HQ and temperatures are expected to become seriously hot later today. Coffee is staying on the desk for now, although I may regret that choice by lunchtime. On the screens, U.S. inflation has finally given markets some relief, Asian equities are finishing the week strongly, and yet the dollar is barely moving. That is the part I find interesting.
Overall Market Sentiment:
The mood is cautiously risk-on.
U.S. CPI came in mild on Wednesday, producer prices were flat yesterday, Treasury yields eased and the probability of another Fed increase in September has dropped considerably. The S&P 500 finished Thursday at another record, while Asian equities are heading for their strongest week in around two months.
Normally, I would expect that combination to create a cleaner weaker-dollar move.
We are not really getting one.
My actual view today is that the Fed side of the dollar story has weakened, but geopolitical risk and oil are stopping USD from simply falling apart. The yen is also back near 160 despite intervention and much stronger expectations for a BOJ increase.
The mistake here would be assuming softer inflation means the entire macro story has suddenly turned easy.
It has become easier for the Fed. That is not the same thing.
Geopolitics:
The U.S.-Iran situation remains central because Washington has threatened to maintain its naval blockade indefinitely while negotiations remain stalled. Brent is holding around $87, with reduced demand expectations stopping crude from pushing higher even as supply risk around the Strait of Hormuz remains significant.
That matters because oil is currently sending a very mixed macro message. Supply risk keeps prices supported, but softer demand forecasts are preventing another July-style surge.
For FX, that leaves the dollar with some defensive support while making the outlook less comfortable for large energy importers such as Europe and Japan.
Macro Calendar:
Today
- U.S. retail sales, 14:30 Amsterdam time: This is today’s main event. After weak payrolls and softer inflation, the missing piece is the consumer. Resilient spending would suggest the U.S. economy is cooling without falling apart, while weaker sales would make the employment slowdown harder to dismiss.
- U.S. consumer sentiment, 16:00 Amsterdam time: I care about the inflation-expectations details as much as the headline. July sentiment improved, but households were still reporting elevated one-year inflation expectations. The latest move in fuel prices could keep that concern alive.
- Euro-area GDP and trade data: The second estimate of second-quarter growth should help confirm whether Europe is stabilising or simply avoiding something worse. The trade numbers matter because energy costs are once again part of the euro story.
- Canadian manufacturing and wholesale data: CAD already has support from stronger employment and relatively firm oil. Today’s numbers can show whether that resilience is spreading beyond the labour market.
The week ahead
- Monday, Canadian CPI: Canada’s inflation report is the first major FX event of the new week. Strong employment has already improved CAD’s domestic story, so inflation now determines whether that resilience also keeps the Bank of Canada cautious.
- Tuesday, UK labour data and U.S. activity releases: UK unemployment and wages will matter for the Bank of England after this week’s decent GDP report. In the U.S., housing starts and industrial production should show whether weaker hiring is spreading into broader activity.
- Wednesday, UK CPI and Federal Reserve minutes: This is probably the most important day of the week. UK inflation will test sterling’s policy support, while the Fed minutes should show how divided policymakers really were over inflation and the possibility of further tightening.
- Thursday, Japanese CPI: Japan’s inflation numbers arrive with USD/JPY already sitting close to the intervention-sensitive 160 area. Stronger inflation would increase pressure on the BOJ to back recent intervention with firmer monetary policy.
- Friday, UK and Canadian retail sales: Both economies finish the week with a consumer test. The reports should show whether households are coping with restrictive rates and still-elevated living costs.
Currency Outlooks:
🔻 USD - Inflation has weakened the Fed case, but the dollar refuses to crack
The dollar index is hovering around 100, with EUR/USD near 1.1540, GBP/USD around 1.3490 and USD/JPY near 159.4.
This week has been fairly friendly for the softer-dollar argument.
July consumer prices barely increased. Core inflation was contained. Yesterday’s producer prices were completely flat, versus expectations for an increase. Markets now see only around a one-in-three probability of another Fed increase in September, down sharply from last week.
Then add the weak July payroll report.
That is a meaningful loss of policy support.
And yet USD is still sitting there.
The cleaner read for me is that dollar risks lean toward weakness, but the market needs one more piece today. If retail sales are also soft, the argument shifts from “inflation is improving” toward “the economy is cooling more broadly.”
If consumption stays resilient, the Fed can remain patient without markets needing to price a serious slowdown.
That would probably keep USD weakness more selective.
🔺 EUR - The Fed is helping, but oil keeps getting in the way
EUR/USD is around 1.1540, not far from its recent highs but still struggling to extend the move.
That makes sense to me.
Lower U.S. rate expectations are clearly helping the euro. Europe also received some relief yesterday when Brent fell more than 2%.
But $87 oil is still not cheap for an energy-importing region.
The euro does not need spectacular growth to remain supported here. It mainly needs U.S. yields to stay contained and crude to avoid another run toward $100.
Risks lean modestly toward strength while those conditions hold.
The mistake would be calling this a powerful European macro story. It is still mostly a relative improvement in the environment around EUR.
🔺 GBP - Growth held up better than expected
GBP/USD is holding around 1.3490, with sterling broadly flat across the week.
Thursday’s UK GDP report helped. The economy expanded 0.4% in the second quarter, which is not spectacular but is enough to show that restrictive Bank of England policy has not completely crushed activity.
That matters because the BoE remains more uncomfortable with inflation than several other major central banks.
Next week brings labour data and CPI, which should give us a much cleaner domestic picture.
For now, risks lean toward relative strength. That tilt weakens if wages and inflation cool together enough to remove sterling’s rate support.
🔺 CAD - Jobs and oil still provide a useful cushion
CAD remains supported near its strongest region in roughly two months after Canada’s very strong employment report last week.
Oil around $87 also helps, although I would not overcomplicate the commodity story. Brent is being supported by supply and geopolitical risk while global demand forecasts are actually weakening.
That is not the same thing as crude rising because the world economy is booming.
Monday’s Canadian CPI becomes the next real domestic test.
For now, risks lean toward CAD strength while labour-market resilience and relatively firm energy prices work together. The bias weakens if inflation cools enough to significantly change Bank of Canada expectations or oil starts falling on a deeper demand concern.
⚖️ CHF - Haven demand and softer U.S. yields mostly cancel out
CHF has two opposing forces working on it.
Middle East uncertainty keeps the franc relevant as a defensive currency, while record equity markets and reduced Fed tightening risk lower the urgency for haven demand.
Softer U.S. yields help against the dollar, but the yield gap remains large enough to matter.
The cleaner read for me is neutral.
CHF becomes more interesting if the geopolitical situation worsens or today’s U.S. consumer data create a genuine growth scare rather than simple policy relief.
⚖️ JPY - Back near 160, but this is not the same market as July
USD/JPY is around 159.4, leaving the yen on track for its worst week in around three months.
That looks ugly after the coordinated intervention we saw only a couple of weeks ago.
The yen has now given back roughly half of that intervention-driven improvement.
But I would not assume we are simply back where we started.
Markets now see a much greater chance that the BOJ increases rates in September. Japanese producer inflation is running above 7%. U.S. Fed expectations have moved in the opposite direction after weak employment and softer inflation.
Those factors should help JPY.
The yield gap is still powerful enough to overwhelm them for now.
That makes the yen mixed rather than cleanly weak in my view. Fundamentals still create pressure, but another move through the 160 area would bring intervention sensitivity straight back to the centre of the market.
The mistake here would be forgetting that authorities have already shown exactly what they are willing to do.
🔺 AUD - RBA support survives the softer inflation story
AUD/USD is trading around 0.7060, holding near its strongest levels in several weeks.
The RBA kept rates unchanged this week but refused to declare victory on inflation. Policymakers still see upside risk and left further tightening available if domestic pressure returns.
That gives AUD a useful rate foundation while Fed expectations are moving the other way.
China remains the limitation. Domestic demand there is still uneven, even as AI and semiconductor activity keep parts of the regional growth story strong.
Risks lean modestly toward AUD strength while the RBA maintains a firmer relative policy stance and global equities stay supported.
⚖️ NZD - Markets still believe the RBNZ may need to act
NZD had a difficult Thursday after a surprisingly soft inflation-expectations reading, but the currency stabilised as markets continued to price a high probability of another RBNZ increase in September.
That is an interesting tension.
New Zealand’s labour market is softer, unemployment has risen and wage pressure has cooled. At the same time, inflation remains uncomfortable enough that markets are not ready to abandon the tightening argument.
The cleaner read is mixed.
NZD can benefit from softer USD conditions, but its domestic picture is less clean than Australia’s. That is why I still see AUD as having the stronger relative policy foundation between the two.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,320 to $4,330, pulling back after reaching its highest level since early June during Thursday’s session. Softer Fed expectations and lower real yields remain supportive underneath, but profit-taking after the recent rally and a relatively stable dollar are creating near-term pressure. Watch whether today’s U.S. retail-sales data push real yields lower again or reinforce the idea that the economy can tolerate current rates. [USD] [REAL YIELDS] [GROWTH]
- 🥈 Silver: XAG/USD is trading around $64.15 to $64.25, slipping modestly and heading for a softer weekly finish despite its strong recent run. Lower Fed expectations support the monetary side of silver, while strong Asian technology performance helps industrial-demand sentiment, although weaker global oil-demand forecasts are a reminder that the growth picture is uneven. Watch whether next week’s U.S. industrial data and UK activity numbers confirm broader economic resilience. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $87.00 to $87.20 per barrel, broadly steady today and heading for a weekly gain of roughly 4% despite Thursday’s decline. The threat of a prolonged U.S. blockade on Iran and restricted Hormuz traffic are supporting supply risk, while a large U.S. inventory build and weaker global demand projections are capping the move. Watch whether physical supply disruption or deteriorating demand expectations becomes the dominant driver next week. [SUPPLY] [GEOPOLITICS] [DEMAND]
- 📈 Stocks: Asian equities are heading for their strongest week in around two months, with the broader regional index up roughly 2.6% for the week, Japan’s Nikkei gaining around 1.5% today and South Korea rising close to 1.8%. Softer U.S. inflation and lower Fed tightening risk are supporting valuations, while strong AI-related earnings have helped restore confidence after July’s technology volatility. Watch whether U.S. consumer data keep the soft-landing story intact or turn weaker growth into the next equity concern. [FED] [TECHNOLOGY] [RISK]
- ₿ Crypto: Bitcoin is trading around $62,800 to $63,900, with the current level near $63,300 after slipping modestly this morning. Softer Fed expectations are supportive for liquidity, but elevated real yields and continued caution across speculative assets have kept BTC’s response much weaker than the recent moves in equities and precious metals. Watch whether today’s consumer data create a larger shift in Treasury yields and broader liquidity expectations. [LIQUIDITY] [REAL YIELDS] [RISK
The main thing I care about today is that the Fed argument has weakened much more than the dollar has.
That is useful information.
We have weaker payrolls.
We have mild CPI.
We now have flat producer prices.
Markets have cut the probability of another September increase substantially.
And yet the dollar index is still around 100.
So I would not overcomplicate the message.
The dollar has lost policy support, but it has not lost every source of support.
Geopolitical uncertainty is still there. Oil remains elevated. The U.S. economy may still be more resilient than the jobs number suggests. Long-term Treasury yields are also high enough that the yield advantage has not disappeared.
Today’s retail-sales report matters because it tells us whether the consumer is joining the slowdown.
If employment is cooling but spending remains resilient, the Fed can afford to wait and markets can continue treating softer inflation as good news.
If employment and consumption weaken together, then this becomes a broader growth discussion.
That is a very different environment.
The yen is the other thing I would not misunderstand going into the weekend.
USD/JPY near 160 looks like intervention did not work. I think that is too simple.
Intervention changed the speed of the move and created a very clear policy boundary. Now markets are asking whether the BOJ will actually back that intervention with higher rates.
Next Thursday’s Japanese inflation report becomes important for exactly that reason.
So my actual view heading into the weekend is that USD risks lean modestly toward weakness, but I do not see a clean dollar breakdown yet.
EUR and GBP are benefiting from the softer Fed story. CAD has strong domestic labour data behind it. AUD retains useful RBA support. JPY has much stronger intervention and BOJ risk around it than the current price suggests.
The mistake here would be assuming this week ended the inflation argument.
It did something more important.
It shifted the burden of proof.
A week ago, the market needed evidence that inflation was cooling.
Now the Fed needs evidence that inflation is still strong enough to justify tightening into a weaker labour market.
That is a meaningful change 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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