Good morning traders from a partly cloudy 16°C Amsterdam, where it is a fresh start around IntelliTrade HQ before temperatures push toward 28°C later today. Coffee is on the desk, Nvidia has just reminded everyone that the AI spending boom is still very much alive, U.S. inflation refused to cool yesterday, and the dollar is sitting near an eight-day high. For me, that combination makes today much more interesting than another quiet pre-Jackson Hole session.
Overall Market Sentiment:
The mood is cautiously risk-on, but inflation is still sitting underneath everything.
Asian technology shares are stronger after Nvidia delivered another huge quarter and a stronger outlook. At the same time, U.S. PCE inflation came in firmer than markets wanted, the probability of another Fed increase has risen again and the dollar has recovered some of the ground it lost earlier this month.
That is the tension today.
The U.S. economy is still producing enough corporate investment and profit growth to avoid a simple slowdown story. But inflation at 3.7% is nowhere near comfortable.
My actual view is that the dollar has regained some near-term support, but I would not call the wider USD confidence problem solved. Tomorrow’s Jackson Hole speech matters because Kevin Warsh now has firmer inflation and stronger business investment on one side, but weaker employment and softer household demand on the other.
The mistake here would be assuming yesterday’s PCE completely reversed the softer Fed story.
It complicated it. That is different.
Geopolitics:
Brent is back around $87 as diplomatic efforts around Iran and the Strait of Hormuz continue, with Qatar now trying to help restart talks between Washington and Tehran.
That has removed a decent part of the immediate oil premium, but the shipping situation is still far from normal and there is no durable agreement yet.
For FX, lower crude helps Europe and Japan while reducing some of the forward inflation pressure facing the Fed.
The cleaner read for me is that geopolitics has become less aggressive as a market driver this morning, not irrelevant.
Macro Calendar:
Today
- BOJ Deputy Governor Himino: Himino argued that timely rate increases can reduce the risk of inflation becoming serious enough to require abrupt tightening later. He stopped short of explicitly pointing to a September increase, but markets still see a very high probability that the BOJ moves next month.
- U.S. initial jobless claims, 14:30 Amsterdam time: Claims were only 206,000 last week, showing that layoffs remain low even though July payroll growth weakened sharply. That distinction matters because a low-hiring economy is very different from an economy experiencing widespread job losses.
- U.S. advance trade and inventory data, 14:30 Amsterdam time: These numbers are secondary for FX, but useful for the Q3 growth picture. Yesterday’s GDP details already showed private demand and business investment holding up better than the headline growth rate suggested.
- Jackson Hole begins: Markets will start hearing from global central bankers today, but Friday’s Fed speech remains the main event. The bigger question is whether policymakers view high long-term yields as useful financial tightening or a separate source of instability.
The rest of this week
- Friday, Fed Chair Kevin Warsh at Jackson Hole: This is the event that matters most. July PCE inflation is still 3.7%, core inflation remains 3.3% and markets have rebuilt some September tightening risk. Warsh has to explain how much more inflation progress the Fed needs before it can become comfortable.
- Friday, Tokyo CPI: Japan gets another important inflation test immediately after Himino’s comments. Firm Tokyo inflation would strengthen the argument for a September BOJ move while USD/JPY remains close to 160.
- Friday, final U.S. consumer sentiment: The preliminary August reading fell sharply to 51.0. I would focus on inflation expectations because weaker confidence combined with persistent price worries is exactly the kind of mix that makes the Fed’s job difficult.
- Friday, preliminary U.S. payroll benchmark revisions: These revisions can change the estimated level of employment over the previous year. With July payrolls already disappointing, a meaningful downward revision would make the labour-market slowdown harder to dismiss.
Currency Outlooks:
⚖️ USD - Inflation gave the dollar support, but not a clean victory
The dollar index is around 99.1, close to its strongest area in roughly eight sessions. EUR/USD is near 1.1655, GBP/USD around 1.3590 and USD/JPY near 159.3.
Yesterday changed the immediate Fed conversation.
Headline PCE inflation held at 3.7% year-on-year, above expectations for some improvement. Core PCE stayed at 3.3%, and the monthly headline increase was also firmer than expected.
Markets responded by rebuilding September tightening risk.
That is reasonable.
But the rest of the data were not purely inflationary.
Real consumer spending was basically flat in July, even as income grew. Employment has already softened. Consumer confidence has fallen.
So the cleaner read for me is mixed.
The dollar has regained short-term policy support, but it still needs Warsh to explain how the Fed thinks about persistent inflation without ignoring softer household and labour conditions.
The dollar has recovered.
It has not repaired every problem underneath it.
🔺 EUR - Cheaper oil helps more than yesterday’s PCE hurts
EUR/USD is around 1.1655, giving back some of its recent gains but staying well above the levels we saw earlier this month.
The euro has two competing stories today.
U.S. inflation staying sticky supports the dollar.
But Brent falling from above $94 toward $87 is genuinely helpful for Europe, especially after recent European business surveys started improving.
That matters because energy was the biggest threat to the euro’s better domestic story.
Lower crude reduces import pressure, gives households a little more breathing room and makes life easier for European manufacturers.
Risks still lean modestly toward EUR strength over the wider picture.
That view weakens if Jackson Hole pushes U.S. yields materially higher again.
⚖️ GBP - Holding up without much fresh domestic help
GBP/USD is around 1.3590, below the recent highs but still holding fairly well.
Sterling does not have a major domestic catalyst today, so the U.S. inflation and yield story is doing most of the work.
The UK backdrop remains mixed but reasonably stable.
Growth has held up, services activity has been resilient and the Bank of England still has enough inflation pressure to remain cautious. The softer wage and labour data we saw last week stop that from becoming a clean tightening story.
Risks are balanced with a mild positive tilt.
Lower energy prices help the UK too, especially if Brent stays below $90 rather than rebuilding another imported inflation shock.
🔻 CAD - Trade tension plus cheaper crude is a difficult combination
USD/CAD is around 1.3880, with CAD struggling to regain the strength it had earlier this month.
The story has changed quite a lot.
A couple of weeks ago Canada had strong employment and rising oil working together.
Now trade tensions with the United States have escalated and Brent has dropped from above $94 toward $87.
That removes two pieces of support at the same time.
Canada’s labour market still gives the currency some domestic resilience, but the cleaner read for me is that risks lean toward weakness while the trade dispute remains unresolved.
The mistake here would be assuming the recent Canadian employment surprise is enough to cancel out a serious deterioration in the country’s largest trade relationship.
⚖️ CHF - Fiscal concerns remain supportive, but Nvidia improves the risk mood
The franc is still holding around relatively firm levels against the dollar.
U.S. fiscal concerns and instability in the Treasury market remain useful defensive arguments for CHF.
Today’s problem is that global risk sentiment has improved.
Nvidia’s results have supported Asian equities, oil is lower and Middle East diplomacy looks slightly less hostile. That reduces the immediate urgency for traditional haven demand.
Risks are balanced.
CHF becomes more interesting again if Jackson Hole creates another round of Treasury volatility or doubts around U.S. policy credibility.
⚖️ JPY - Himino kept September alive without giving the yen a real push
USD/JPY is around 159.3, barely moving after today’s BOJ comments.
That reaction tells us a lot.
Himino made the argument for timely tightening. He talked about inflation risk. Markets already see a high probability of another increase in September.
And yet the yen barely strengthened.
The rate gap is still doing a lot of work.
The cleaner read for me is mixed.
JPY has stronger BOJ support, lower oil is helpful for Japan and intervention sensitivity becomes uncomfortable again as USD/JPY approaches 160.
But the market clearly wants something firmer than another argument that rates may need to rise eventually.
Tomorrow’s Tokyo CPI can add another piece.
🔺 AUD - Hot inflation is keeping the RBA argument alive
AUD/USD is around 0.7180, making the Australian dollar one of the stronger majors this morning.
This week’s inflation data changed the conversation.
Underlying inflation rose to 3.6%, pushing markets to rebuild expectations that the RBA may still need another increase despite last week’s weak employment report.
That gives AUD a proper domestic reason to outperform.
The economy is sending conflicting signals, though.
Inflation is too high.
Employment has weakened.
That means the RBA does not have an easy decision, but it does mean markets cannot comfortably assume that the tightening cycle is finished.
Risks lean toward relative AUD strength while that inflation pressure remains.
🔻 NZD - AUD now has the cleaner regional story
NZD remains around the upper 0.59 area, but it is struggling to match the Australian dollar.
The difference is domestic.
Australia just received another inflation shock that strengthened the RBA argument.
New Zealand has higher unemployment, softer wage pressure and more spare capacity in its labour market.
The RBNZ can still remain inflation-sensitive, but the economy has less room to absorb further restriction.
Risks lean toward relative NZD weakness.
A softer global dollar can still support the currency generally, but AUD currently has the stronger independent macro story between the two.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,625 to $4,635, recovering about 0.8% after falling sharply following Wednesday’s PCE release. Sticky U.S. inflation and still-high real yields remain a headwind, while persistent concerns around U.S. fiscal credibility and the dollar are keeping underlying demand firm. Watch whether Jackson Hole pushes real yields higher or reinforces the view that financial conditions are already restrictive enough. [USD] [REAL YIELDS] [FISCAL RISK]
- 🥈 Silver: XAG/USD is trading around $68.70 to $68.90, rebounding after Wednesday’s decline and broadly following gold higher. Dollar and yield uncertainty remain important, while Nvidia’s strong outlook gives the industrial-demand side a useful boost through continued AI infrastructure investment. Watch whether tomorrow’s policy message supports the monetary side without damaging the global growth story. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $87.00 to $87.30 per barrel, down roughly 0.7% today and heading for a fourth consecutive decline after trading above $94 last week. Renewed diplomatic efforts involving Qatar and Iran are reducing the immediate Hormuz supply premium, although commercial shipping conditions remain uncertain. Watch actual progress on reopening normal energy flows rather than political language alone. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Asian equities are firmer, with the broad regional index outside Japan up around 0.7%, South Korea gaining roughly 1.5% and Taiwan around 0.9% higher, while S&P 500 futures are up about 0.4%. Nvidia’s stronger-than-expected results and outlook have restored confidence in AI investment despite sticky U.S. inflation and elevated financing costs. Watch whether the technology strength survives a potentially firmer Fed message from Jackson Hole. [NVIDIA] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around $79,000, up modestly this morning and holding close to the upper end of its recent range. Concerns around the dollar and U.S. fiscal policy remain supportive, while the prospect of tighter Fed policy and elevated real yields continue working in the opposite direction. Watch whether Jackson Hole strengthens the dollar enough to challenge the recent liquidity and currency-diversification narrative. [LIQUIDITY] [USD] [RISK]
The main thing I care about today is that yesterday gave both sides of the Fed argument something to work with.
The inflation side got 3.7% PCE.
That is too high.
Core PCE stayed at 3.3%.
That is also too high.
So anyone arguing that the Fed can simply forget inflation after one mild CPI report has a problem.
But the growth side has evidence too.
Real consumer spending was basically flat in July.
Employment has weakened.
Consumer confidence is deteriorating.
Housing remains under pressure.
So the Fed does not have the luxury of looking at inflation in isolation either.
That is why tomorrow matters.
Warsh needs to explain how the Fed thinks about an economy where inflation remains clearly above target but the weaker parts of demand are becoming more visible.
The mistake here would be turning this into a simple hawkish-versus-dovish speech.
I think the bigger issue is credibility.
If Warsh focuses heavily on 3.7% inflation and makes clear that the Fed is willing to tighten again, short-term yields and the dollar can keep some of yesterday’s support.
But then markets have to ask what that does to housing, employment and long-duration financing.
If he focuses too heavily on weaker growth, markets may wonder whether the Fed is becoming comfortable with inflation staying above target.
Neither side is particularly easy.
Nvidia gave us another important piece overnight.
The AI investment boom is not slowing down yet.
Revenue more than doubled.
Demand remains huge.
The company expects another enormous year of growth.
That matters because business investment is one of the strongest parts of the U.S. economy right now.
So I would not describe the United States as simply slowing.
The economy is splitting.
Housing is weak.
Consumers are becoming cautious.
Hiring has softened.
But AI investment and corporate profitability remain extremely strong.
That is a very different policy problem from a normal recession scare.
AUD is probably the cleanest currency-specific story today.
Australia has softer employment but hotter inflation.
That means the RBA still has a reason to remain uncomfortable.
JPY is more frustrating.
The BOJ is becoming more willing to discuss higher rates, but the yen barely responds because the international yield gap remains enormous.
EUR is getting quiet help from lower oil.
CAD is getting the opposite.
And the dollar itself is sitting somewhere in the middle of all of it.
My actual view today is that USD has regained enough support that I would no longer describe immediate dollar weakness as the cleanest macro theme.
PCE changed that.
But I also would not say the dollar has returned to the strong policy story we had earlier this summer.
Employment and consumption are too soft for that.
So the cleaner read for me is a dollar that has stopped falling while markets wait for the Fed to explain what matters more.
Inflation that is still too high.
Or growth that is beginning to lose momentum.
Tomorrow, Warsh has to tell us how the Fed thinks about both.
That is the part I would not misunderstand.
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.