Good morning traders from a mostly cloudy 16°C Amsterdam, where a couple of morning showers are passing around IntelliTrade HQ before brighter spells and temperatures near 21°C later today. Coffee is on the desk, the dollar is sitting near a three-month low, gold has just pushed above $4,500, and yesterday gave us a market move I think is more important than the Fed minutes themselves. The U.S. Treasury stepped into a stressed bond market, long yields dropped, and one of the dollar’s strongest remaining supports suddenly weakened.
Overall Market Sentiment:
The mood is cautiously constructive, but there is a weird policy tension underneath it.
The dollar index is near a three-month low, long-term Treasury yields have pulled back from their recent extremes, gold is holding close to a two-month high and equities recovered modestly yesterday. Normally that combination would look fairly straightforward.
It is not.
The Fed minutes showed policymakers were actually becoming more worried about inflation in July. Several were prepared to tighten policy, and many thought further restriction could still become necessary if inflation refused to return toward target.
Then the Treasury announced larger long-duration bond buybacks and helped push those same long yields lower.
My actual view today is that the dollar has lost another important layer of support, but the inflation problem itself has not disappeared. The mistake here would be treating lower bond yields as proof that inflation risk suddenly improved.
It did not. Part of yesterday’s move came from policy support for the bond market itself.
Geopolitics:
Brent is holding near $92 as the U.S.-Iran conflict remains unresolved and shipping through the Strait of Hormuz stays far below normal levels.
The UAE has also suspended economic and financial dealings with Iran, adding another layer of regional tension. Meanwhile, conflicting claims continue over whether Hormuz is effectively open. The practical answer is more useful than the political one: many commercial operators are still avoiding the route.
That matters because oil has now risen for five consecutive sessions.
I would not overcomplicate this. Brent does not need to return above $100 to keep inflation uncomfortable. Holding around $90 to $92 for long enough is already enough to influence transport costs, inflation expectations and the way central banks talk about future price pressure.
Macro Calendar:
Today
- Australian employment: Australia lost 15,800 jobs in July, versus expectations for an increase, while unemployment rose to 4.5%, its highest level since late 2021. Participation also slipped and hours worked fell 0.6%. That is a noticeably softer labour report and takes some immediate pressure away from the RBA.
- U.S. initial jobless claims, 14:30 Amsterdam time: This matters more than usual after July payrolls fell. Markets want to know whether the labour slowdown still looks like weaker recruitment or whether layoffs are also starting to increase.
- Philadelphia Fed manufacturing index, 14:30 Amsterdam time: Manufacturing has recently held up better than housing and employment, helped partly by technology investment. Today’s survey can show whether that resilience survived into August.
- U.S. Treasury market: This is effectively a macro event now. The Treasury plans to double the size of liquidity-support buybacks for longer-dated debt beginning in September. The market will be watching whether yesterday’s yield relief holds or whether investors test how much influence the program can really have.
The rest of this week
- Friday, Japanese CPI: This is the main JPY event. Inflation arrives with USD/JPY still close enough to 160 that every change in BOJ expectations matters. Firm underlying inflation would strengthen the case for further normalisation.
- Friday, global flash PMIs: These reports give us the first broad look at August business activity across Japan, Europe, the UK and the United States. I would focus heavily on input prices and employment because oil has risen again while labour conditions are cooling in several economies.
- Friday, UK retail sales: Sterling has had a complicated week with softer wages but firmer headline inflation. Consumer spending can show whether households are still holding up under restrictive policy and higher energy costs.
- Friday, Canadian retail sales: CAD has recently benefited from strong employment and expensive crude. Consumer data can show whether that resilience is broadening beyond the labour and energy stories.
Currency Outlooks:
🔻 USD - One of the dollar’s strongest supports just weakened
The dollar index is around 98.8, its lowest area since May. EUR/USD is near 1.1680, GBP/USD is around 1.3600 and USD/JPY has eased toward 158.5.
This is the clearest dollar weakness we have had in a while.
And the reason has changed again.
First, weak jobs took away part of the Fed argument.
Then CPI and PPI cooled.
Retail sales softened.
Now the Treasury has directly helped calm the long end of the bond market, where yields had been providing USD with support even as Fed expectations became less aggressive.
That matters because I have spent most of this week saying the dollar could not weaken cleanly while the 30-year yield sat above 5.3%.
Yesterday, that yield dropped back toward 5.18%.
The cleaner read for me is that risks now lean more clearly toward USD weakness.
But I would not call the inflation story solved. The Fed minutes were uncomfortable, oil is still above $91 and long-term fiscal concerns have not disappeared just because yields fell for one session.
Dollar weakness becomes more convincing if the yield decline holds without stronger U.S. data rebuilding the policy argument.
🔺 EUR - The softer dollar is finally doing more than oil is taking away
EUR/USD is around 1.1680, its strongest area since late May.
The euro is benefiting directly from the collapse in one of USD’s remaining yield supports. That is the cleaner side of the story.
Europe still has an energy problem.
Brent near $92 raises import costs, hurts industrial margins and complicates the inflation-growth mix. Normally I would expect that to limit EUR much more aggressively.
Instead, the dollar side is currently dominating.
Risks lean toward relative EUR strength while long U.S. yields remain below their recent extremes.
The bias weakens if the Treasury effect fades quickly or tomorrow’s European PMIs show that higher energy costs are already damaging activity.
🔺 GBP - Sterling is benefiting despite a less convincing domestic rate story
GBP/USD is around 1.3600, close to a three-month high.
That is a strong performance considering this week’s UK labour and inflation details were not especially aggressive.
Wage pressure cooled. Services inflation eased. Headline CPI rose mainly because of energy.
So sterling is not strengthening because the BoE suddenly looks much more restrictive.
It is strengthening because the dollar is weaker and the UK economy has held up reasonably well so far.
That distinction matters.
Risks lean modestly toward GBP strength while USD yields remain contained. Friday’s retail-sales report needs to show that UK households are still coping reasonably well with the current policy and energy environment.
⚖️ CAD - Oil helps, but the dollar move is doing more today
CAD still has a decent relative foundation.
Canadian employment surprised strongly earlier this month, Brent is near $92 and the immediate threat of another tariff escalation has eased somewhat while negotiations continue.
Normally that combination would leave risks leaning firmly toward strength.
The complication is that high oil is increasingly becoming a global inflation problem rather than simply a Canadian terms-of-trade benefit.
That is why I would keep the tilt balanced to mildly firm.
Friday’s retail-sales data can show whether strong employment is actually translating into broader household demand.
🔺 CHF - Lower U.S. yields finally give the franc some room
USD/CHF is around 0.8000, with the franc near its strongest area in roughly two months.
This makes sense.
CHF already had geopolitical support. The problem was that U.S. long yields were so high that the dollar offered both haven demand and much better returns.
Yesterday reduced that problem.
Lower Treasury yields and a weaker dollar give the franc more room to express its defensive role, particularly while Middle East uncertainty remains elevated.
Risks lean toward relative CHF strength while U.S. yields stay contained.
The view weakens if yesterday’s bond move reverses quickly.
🔺 JPY - Treasury yields finally moved in the direction Japan needed
USD/JPY is around 158.5, giving the yen some breathing room from the 160 area.
For weeks, Japan has been fighting two things at once.
Authorities tried intervention.
The BOJ became more inflation-sensitive.
Japanese yields climbed.
But U.S. yields stayed high enough to keep the rate gap extremely uncomfortable.
Yesterday changed that part of the equation.
The decline in long Treasury yields and broad USD weakness finally gave JPY help from the U.S. side as well.
Friday’s CPI now matters even more.
If Japanese inflation remains firm while U.S. yields stay lower, the policy gap can narrow from both directions.
Risks lean toward JPY strength in the immediate picture.
The mistake here would be assuming the underlying yield problem is gone. It is not. But for once, the macro pressure is no longer pointing entirely against the yen.
🔻 AUD - Today’s jobs report weakens the RBA argument
AUD/USD is around 0.7110, giving back some ground after Australia’s employment report.
The details were clearly softer.
Employment fell 15,800. Unemployment rose to 4.5%. Participation eased. Hours worked dropped. Underemployment stayed elevated.
Add Wednesday’s moderate wage growth and the RBA has much less reason to rush toward another policy move.
That is an important shift.
The RBA still has an inflation problem, so this is not a sudden easy-policy story. But the labour market is now showing clearer evidence that previous tightening is doing its job.
Risks lean toward AUD weakness on the domestic side.
The softer U.S. dollar is providing a cushion, which is why the currency is not falling more sharply.
⚖️ NZD - External dollar weakness offsets the softer regional policy story
NZD continues benefiting from broad USD weakness, but its domestic foundation remains less convincing than several other major currencies.
New Zealand already has rising unemployment and softer wage pressure. Now Australia’s labour market is also cooling, which weakens the wider regional rate story.
The positive side is the global backdrop.
Lower U.S. yields and a weaker dollar are helpful for NZD, especially if equities remain stable.
The cleaner read is balanced.
NZD can continue benefiting from USD pressure, but I still would not describe it as having a strong independent macro argument.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,490 to $4,510, after briefly reaching roughly $4,526, its highest level in more than two months. Wednesday’s Treasury announcement drove a sharp decline in long yields and the dollar, giving gold its strongest one-day advance in weeks, while persistent fiscal and geopolitical concerns added support. Watch whether the 30-year Treasury yield holds below the recent 5.3% extreme or starts reversing yesterday’s relief. [USD] [REAL YIELDS] [FISCAL RISK]
- 🥈 Silver: XAG/USD is trading around $67.00, extending its recovery alongside gold and pushing well above the levels seen earlier this week. Lower U.S. yields and dollar weakness are supporting the monetary side, while industrial demand remains more mixed after softer Australian labour data and uneven global manufacturing signals. Watch Friday’s flash PMIs for the first broad August read on industrial demand. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $91.80 to $92.00 per barrel, extending a fifth consecutive advance and holding at its highest area since late July. Restricted Hormuz flows, the U.S.-Iran deadlock and renewed regional tensions are supporting supply risk, while a 4.4 million-barrel increase in U.S. crude inventories is preventing a more aggressive move. Watch physical shipping activity through Hormuz and whether regional tensions broaden further. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: The S&P 500 finished Wednesday around 7,708, with the Dow and Nasdaq also gaining roughly 0.2% as lower Treasury yields helped end a three-session decline. The Treasury’s bond-buyback expansion eased pressure on valuations, while persistent inflation concerns and recent technology weakness continue limiting enthusiasm. Watch whether the yield relief lasts long enough for the recovery to broaden beyond one session. [YIELDS] [TECHNOLOGY] [RISK]
- ₿ Crypto: Bitcoin is trading around the upper-$68,000 area, after jumping above $68,000 as the Treasury announcement weakened the dollar and pulled long yields lower. Liquidity conditions improved quickly, while broader crypto momentum also benefited from renewed policy attention around the sector. Watch whether Bitcoin can hold the move if Treasury yields stabilise rather than continue falling. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is that the Treasury just changed the bond-market conversation without changing the Fed’s inflation problem.
That is unusual.
The Fed minutes were not particularly relaxed.
Several policymakers were ready to tighten in July.
Many still believed further restriction could become necessary if inflation did not move properly toward target.
Then a few hours later, the Treasury effectively said it did not want the long end of the bond market becoming this disorderly.
The result was lower yields, a weaker dollar, higher gold, stronger equities and a big move in Bitcoin.
The mistake here would be treating that as the same thing as the Fed becoming easier.
It is not.
The Treasury is dealing with market functioning and the cost of financing government debt.
The Fed is dealing with inflation and employment.
Those goals can overlap, but they are not identical.
And that is where this gets interesting for FX.
The dollar was holding up partly because markets could say, “Fine, maybe the Fed stays unchanged, but U.S. long yields are still extremely attractive.”
Yesterday weakened that argument.
That is why EUR/USD is near 1.17.
That is why USD/CHF is around 0.80.
That is why the yen has moved away from 160.
This is a broader dollar move than the intervention-driven weakness we saw earlier this month.
I would still not overcomplicate one day into a permanent trend.
The Treasury buybacks do not fix the U.S. fiscal deficit.
They do not remove $40 trillion of federal debt.
They do not make oil cheaper.
They do not change what the Fed minutes said about persistent inflation.
And they do not guarantee bond investors will stop demanding more compensation for holding long-term U.S. debt.
That is what the next few sessions are really about.
Does the bond market accept the Treasury’s attempt to calm conditions?
Or does it push yields higher again?
If yields stay lower, dollar weakness has a much cleaner foundation.
If the 30-year starts moving back toward 5.3%, then we learn very quickly that yesterday was relief rather than a structural change.
There is also a separate AUD story today.
Australia’s employment report finally gave us clearer evidence that restrictive policy is cooling the labour market. After moderate wage data yesterday, the RBA now has less reason to rush.
That makes AUD’s domestic rate story weaker, even while broad USD weakness is helping the exchange rate.
JPY is almost the mirror image.
Japan still has difficult fundamentals, but U.S. yields have finally moved in a direction that supports what Japanese authorities and the BOJ have been trying to achieve.
Friday’s inflation report can strengthen that argument further.
So my actual view today is that USD risks lean more clearly toward weakness than they did yesterday.
Not because the Fed became suddenly relaxed.
Because the bond market received support from somewhere else.
That difference matters.
The Fed is still worried about inflation.
The Treasury is worried about yields.
The dollar is caught between them.
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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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