Good morning traders from a warm and sunny Amsterdam, where it is already a comfortable start near IntelliTrade HQ and another summer day is building. Coffee is ready, the market finally has two softer inflation reports behind it, and now comes the harder question. Does this really change the dollar story, or is the market getting ahead of itself?
Overall Market Sentiment
The market is leaning cautiously risk-on, but I would not call it a full shift yet.
Both U.S. CPI and PPI surprised on the soft side this week. Treasury yields have eased, the dollar is sitting near a one-month low and markets have almost completely removed expectations of a July Federal Reserve rate hike. That is a meaningful change.
The part I would not misunderstand is this. Lower inflation is good news, but oil is moving in the opposite direction because of Middle East tensions. If Brent stays elevated, today’s inflation relief can become tomorrow’s inflation problem. The cleaner read for me is that the dollar has lost momentum, but it has not lost its entire macro foundation.
Geopolitics
The conflict involving the United States and Iran remains the biggest external macro risk. Oil has now risen for four consecutive sessions as markets continue to price supply disruption risks around the Strait of Hormuz.
That matters because higher energy prices eventually work their way back into inflation expectations. This is exactly why markets cannot simply ignore the Fed after two softer inflation reports.
Macro Calendar
Today
- U.S. Retail Sales will tell us whether the American consumer is still spending despite higher borrowing costs and geopolitical uncertainty. Strong consumption would support the broader U.S. growth story.
- Initial Jobless Claims remain an important check on labour-market resilience. The Fed has become more comfortable with inflation, but employment remains equally important.
- Philadelphia Fed Manufacturing Survey offers another look at business activity after softer inflation data.
The rest of this week
- U.S. Industrial Production helps confirm whether economic momentum is slowing or simply normalising.
- University of Michigan Consumer Sentiment will be watched for inflation expectations, particularly after oil moved higher this week.
- Final Eurozone inflation data remains important for ECB expectations as energy prices begin moving higher again.
Currency Outlooks
🔻 USD - Momentum has faded, but the bigger trend is still being tested
The dollar index is trading near a one-month low after softer CPI and PPI sharply reduced expectations of another immediate Fed hike. Markets now see only a small chance of tightening this month, while attention has shifted toward September.
I would not overcomplicate this. Two softer inflation reports matter. They deserve respect.
But the mistake would be assuming the Fed suddenly becomes comfortable. Oil is trading above $85, geopolitical risks remain elevated and the labour market has not collapsed. The cleaner read for me is that dollar risks lean softer for now, but confirmation still needs to come from growth data and Treasury yields.
⚖️ EUR - Benefiting more from dollar weakness than euro strength
EUR/USD has pushed comfortably above 1.14 as the dollar softened across the board.
The euro story itself has not changed very much. Europe still faces slower growth and remains exposed to higher imported energy prices. That means part of the recent move is really a weaker-dollar story rather than a dramatically stronger euro story.
⚖️ GBP - Sterling keeps benefiting from the softer Fed outlook
GBP/USD continues trading around the mid-1.34 area.
Sterling has quietly become one of the steadier performers this week. Lower U.S. yields are helping, but UK growth data later this week becomes more important if GBP wants to maintain that strength without relying only on the dollar side of the equation.
🔺 CAD - Oil remains the obvious support
CAD continues receiving support from stronger oil prices.
The important point is that this oil rally is geopolitical rather than demand-driven. Canada benefits from higher crude prices, but if geopolitical risks begin damaging global growth, some of that advantage can quickly disappear through broader risk-off flows.
🔺 CHF - Safe-haven demand has not disappeared
The franc remains well supported.
Even though inflation has improved, geopolitical uncertainty keeps demand for defensive currencies alive. CHF may not outperform everywhere, but its defensive role still makes sense while Middle East tensions remain unresolved.
🔻 JPY - Still the weakest major currency
JPY remains under pressure despite the softer dollar.
That tells me this is still mainly a yield story rather than simply a dollar story. Intervention risk also has not disappeared. Just because USD/JPY has stopped accelerating does not mean Japanese officials have become comfortable.
The mistake here would be forgetting how quickly headlines can move yen pairs when intervention risk stays elevated.
⚖️ AUD - Softer USD helps, China still limits enthusiasm
AUD has benefited from weaker U.S. yields.
China’s slower growth picture continues limiting upside enthusiasm, while improving global risk appetite provides support underneath. AUD is trading more as a risk currency than a commodity currency this week.
⚖️ NZD - Following the broader dollar move
NZD has also benefited from weaker USD conditions.
Domestic New Zealand developments are taking a back seat today. The currency continues responding mainly to global risk appetite, Treasury yields and the broader direction of the U.S. dollar.
Cross-Asset Wrap
- 🪙 Gold: Gold is trading around $4,030 after recovering strongly earlier this week and now consolidating near recent highs. A weaker U.S. dollar and lower real Treasury yields continue providing support, while stronger oil prices create longer-term inflation uncertainty. Watch whether retail sales move Treasury yields enough to challenge gold’s recent recovery. [USD] [REAL YIELDS] [INFLATION]
- 🥈 Silver: XAG/USD is trading around $58.50, broadly following gold while remaining slightly more volatile. Lower yields are supportive, but slower Chinese growth expectations continue limiting enthusiasm through the industrial-demand channel. Watch whether silver continues matching gold or begins lagging if growth concerns increase. [USD] [INDUSTRIAL DEMAND] [YIELDS]
- 🛢 Oil (Brent): Brent is trading around $85 to $86 per barrel after rising for a fourth consecutive session. Supply concerns linked to U.S.-Iran tensions and shipping risks through the Strait of Hormuz remain the dominant drivers despite softer U.S. inflation data. Watch for any geopolitical developments that either reduce or increase supply disruption risks. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Global equities are mixed after a sharp sell-off in semiconductor shares weighed on Asian markets, even as softer inflation continued supporting bond markets and broader risk appetite. Technology remains under pressure while lower yields continue helping the wider equity outlook. Watch whether earnings and U.S. retail sales broaden the recovery beyond a few leading sectors. [EARNINGS] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around the mid-$60,000 region, holding onto recent gains after softer inflation reduced pressure from rising yields. Liquidity conditions have improved modestly, although crypto continues responding closely to broader risk sentiment and real-rate expectations. Watch whether Treasury yields remain contained after today’s U.S. data. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is whether markets become too confident after just two inflation reports.
The mistake here would be assuming the Fed story is finished. Inflation has cooled, but oil is climbing. Those two forces are pulling in opposite directions, and that usually creates more volatility rather than less.
I would not overcomplicate this. The cleaner read for me is still the relationship between the dollar, Treasury yields and oil. If yields stay lower despite expensive oil, dollar weakness can continue. If oil starts rebuilding inflation expectations, the dollar may find support much sooner than many expect.
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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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