Good morning traders from a sunny Amsterdam, where it is around 20°C near IntelliTrade HQ and heading toward 27°C to 28°C this afternoon. Coffee is on the desk, the screens are calmer after yesterday’s U.S. inflation surprise, but oil is making sure nobody gets too comfortable.
Overall Market Sentiment:
The market has moved into a calmer, mildly risk-on mood after U.S. inflation came in softer than expected. The dollar and Treasury yields pulled back, while equities recovered as traders reduced the chance of an immediate Federal Reserve rate increase.
My view today is that the inflation report matters, but it has not settled the bigger debate. The dollar has cooled, but it is not broken yet. The mistake here would be treating one softer CPI number as proof that inflation risk has disappeared while Brent is trading near a one-month high.
Geopolitics:
Renewed confrontation between the United States and Iran has pushed the Strait of Hormuz back into the centre of the energy story. Shipping disruption and concern about attacks on regional infrastructure have lifted Brent toward $86 and tightened the market’s view of near-term supply.
That matters because June inflation benefited from lower energy costs, while the current oil move points in the opposite direction. The Fed is looking at softer historical inflation and a potentially less comfortable inflation path ahead. That tension is the real market story today.
Macro Calendar:
Today
- U.S. producer inflation: June PPI is the main data test. CPI gave markets some relief, but producer prices can show whether cost pressure is still building inside supply chains. The release is scheduled for 8:30 a.m. Eastern Time.
- Federal Reserve Chair Kevin Warsh: The second day of the semiannual monetary policy testimony is scheduled before the Senate Banking Committee. Markets are watching whether he keeps a firm inflation tone after yesterday’s softer consumer data.
- Federal Reserve Beige Book: The report arrives at 2:00 p.m. Eastern Time and should give a more practical view of demand, employment, pricing power and the effect of higher energy costs across the economy.
The rest of this week
- Thursday, UK GDP: May’s monthly growth estimate will give sterling a proper domestic test. The question is whether UK activity is holding up well enough to support current rate expectations.
- Thursday, U.S. retail sales: Household spending will show whether American demand remains resilient after several months of elevated inflation and interest rates. A strong report would make it harder to build a simple weaker-dollar story from CPI alone.
- Friday, U.S. industrial production: This will help clarify whether softer inflation is arriving alongside stable economic activity or a more meaningful slowdown. The difference matters for Treasury yields and Fed expectations.
- Friday, final euro-area inflation: The flash estimate showed annual inflation easing to 2.8% in June from 3.2% in May. The details will matter because energy remains the fastest-rising major component.
Currency Outlooks:
🔻 USD - Softer inflation has interrupted the dollar’s momentum
The dollar index has slipped toward 100.8 after June CPI fell 0.4% on the month and annual inflation slowed to 3.5%. Core inflation also came in softer at 2.6%, pushing the probability of a July Fed increase sharply lower.
That is a meaningful change, but not a full reset. The inflation improvement was helped by lower energy prices during June, while oil is now moving higher again. PPI, the Beige Book and the response in Treasury yields need to confirm that the dollar’s policy support is genuinely fading.
The cleaner read for me is that USD risks lean softer today. That view weakens if producer inflation remains firm, oil continues rising and Fed communication stays uncomfortable with inflation.
⚖️ EUR - Dollar relief helps, but oil limits the upside story
EUR/USD is holding around 1.1430 after benefiting from the pullback in the dollar. The euro has stayed resilient, but I would not confuse that with a major improvement in the euro-area economy.
Europe remains more exposed to imported energy pressure than the United States. If Brent stays elevated, the region faces an awkward mix of weaker growth and renewed inflation pressure.
For now, risks are balanced. Falling U.S. yields support EUR, while high energy costs keep the currency from having a completely clean macro story.
⚖️ GBP - Firm near 1.34, but UK GDP now has to support it
GBP/USD is trading near 1.3400, helped by the softer dollar and reduced expectations of an immediate Fed move. Sterling has been steady, but much of its latest improvement has come from the U.S. side of the pair.
Thursday’s UK GDP release is the more useful test. Resilient activity would give the pound a stronger domestic foundation. Weak growth would remind markets that firm sterling cannot rely on dollar softness forever.
🔺 CAD - Oil support is clear, but this is still a supply shock
Brent near $86 gives CAD a useful terms-of-trade cushion. Canada benefits more directly from higher energy prices than the major energy-importing economies, which keeps risks tilted toward relative strength.
The part traders should not misunderstand is why oil is rising. This is being driven by threatened supply and geopolitical escalation, not a sudden improvement in global demand. A deeper risk-off move could still create defensive dollar demand and offset some of CAD’s oil support.
🔺 CHF - Geopolitical protection remains relevant
The franc retains support from geopolitical uncertainty and concern about energy supply. Equities are calmer after CPI, but the underlying Middle East risk has not gone away.
CHF may find it harder to outperform USD if Treasury yields rebound. It can still remain firm against currencies that are more exposed to weaker global growth or imported energy inflation.
🔻 JPY - The dollar cooled, but the yen barely responded
USD/JPY remains near 162.2, close to multi-decade extremes, even after the wider dollar index weakened. That tells me the main yen problem is still the gap between Japanese and overseas yields, not only broad USD strength.
This is where traders can get trapped. A weak macro foundation does not remove intervention risk. The closer USD/JPY stays to extreme territory, the more sensitive the market becomes to comments or action from Japanese officials.
JPY needs a sustained fall in global yields, a more forceful Bank of Japan response or credible official intervention to change the current tilt. Until then, risks still lean toward weakness, but volatility risk is high.
⚖️ AUD - Softer USD meets slower Chinese growth
AUD/USD is holding near 0.6980. Softer U.S. yields and improved equity sentiment are helping, but China’s second-quarter growth slowed to 4.3%, showing that domestic momentum remains uneven.
The Australian dollar is trading as a mix of rate currency, China proxy and general risk barometer. That leaves the outlook balanced. Better global risk appetite helps, while weaker Chinese demand and higher energy costs limit the strength of the story.
🔺 NZD - Dollar softness offers support, but confirmation is still needed
NZD has moved toward one-month highs as the dollar weakened after CPI. The move is also getting some help from the calmer equity tone, although slower Chinese growth remains a concern for the wider regional outlook.
Risks lean modestly toward strength while U.S. yields remain lower. The bias weakens if PPI revives Fed concerns or if the improvement in global equities fades.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading near $4,028 after falling around 0.6% today, following a roughly 2% rebound in the previous session from a two-week low. A softer dollar and lower real yields initially supported the recovery, but rising oil prices and renewed inflation concerns are limiting demand for the non-yielding metal. Watch whether PPI allows real yields to stay lower or brings the rate debate back into focus. [USD] [REAL YIELDS] [INFLATION]
- 🥈 Silver: XAG/USD is trading around $58.50, inside a session range of roughly $58.15 to $59.05, after recovering strongly alongside gold in the previous session. Silver is being pulled between a softer dollar and lower yields on one side, and weaker industrial-demand expectations linked to slower Chinese growth on the other. Watch whether silver keeps tracking gold or begins to underperform as the growth story becomes more important. [USD] [YIELDS] [CHINA]
- 🛢 Oil (Brent): Brent is trading near $85.70 after climbing to a one-month high and building on the previous session’s sharp geopolitical move. Supply disruption, reduced shipping through the Strait of Hormuz and concern about attacks on regional energy infrastructure are outweighing softer Chinese growth. Watch for changes in tanker traffic, physical supply conditions or diplomatic communication. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Asian equities are firmer, with the MSCI Asia-Pacific index excluding Japan up around 2.4%, Japan’s Nikkei gaining roughly 1% and South Korea’s KOSPI rebounding sharply after softer U.S. inflation improved the rate outlook. Lower Treasury yields, reduced immediate Fed pressure and stronger bank earnings are supporting sentiment, while elevated oil prices remain the main macro constraint. Watch whether U.S. producer inflation confirms the softer rate story and allows the equity recovery to broaden beyond a few leading sectors. [CPI] [YIELDS] [EARNINGS]
- ₿ Crypto: Bitcoin is trading near $64,900 after moving between approximately $62,440 and $65,000 during the session, extending its recovery alongside the improvement in wider risk appetite. Lower real yields, softer dollar liquidity conditions and stronger equity sentiment are supporting the move, while renewed inflation pressure could make conditions less comfortable. Watch whether Bitcoin holds the upper part of today’s range after PPI and the next move in Treasury yields. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is whether producer inflation confirms yesterday’s CPI relief. One softer consumer report has reduced immediate pressure on the Fed, but it has not removed the bigger problem.
The mistake here would be reading the dollar’s first decline as a complete trend change. For that to become a cleaner story, inflation needs to soften beyond one report, Treasury yields need to stay lower and oil needs to stop rebuilding the inflation risk.
I would not overcomplicate this. Watch the relationship between USD, Treasury yields and Brent. If yields stay lower despite expensive oil, the dollar’s bias can remain softer. If yields rebound because energy revives inflation concerns, the dollar story becomes mixed again very quickly.
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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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