Good morning traders from a bright and mild Amsterdam, where it is around 18°C near IntelliTrade HQ and the day should warm up nicely from here. Coffee is on the desk, U.S. CPI is sitting right in the middle of today’s market, and oil has now climbed for six sessions in a row. That last part matters because the market spent most of last week getting comfortable with the idea that inflation pressure was fading. This morning, I am not sure traders should be quite that comfortable.
Overall Market Sentiment:
The mood is cautious and slightly defensive.
The dollar is a little firmer, oil is pushing toward $90, gold is holding near recent highs and equity markets are struggling to find much conviction before U.S. inflation. Friday’s weak employment report is still keeping Fed expectations softer than they were in July, but geopolitical risk is rebuilding the energy side of the inflation story.
My actual view today is that CPI matters less as a single headline number and more as a test of whether the Fed can genuinely focus on weaker employment.
The mistake here would be assuming softer payrolls automatically gave the Fed permission to relax. It did not. If underlying inflation remains sticky, policymakers are dealing with a much uglier combination of weaker hiring and persistent price pressure.
Geopolitics:
Middle East tensions have moved back into the centre of the inflation story. Brent is approaching $90 as hopes for a U.S.-Iran agreement fade, shipping through the Strait of Hormuz remains heavily disrupted and fresh attacks around important shipping routes are keeping the supply premium alive.
There are other geopolitical pressure points on the screen as well, including renewed tension around the Red Sea and Asia, but oil is the part that matters most for FX today.
That matters because July CPI will not fully capture this latest rise in crude. So even if today’s inflation number looks better, the market still has to think about what happens next.
I would not overcomplicate this. A softer CPI helps the Fed. Oil near $90 stops that help from feeling completely comfortable.
Macro Calendar:
Today
- U.S. CPI, 14:30 Amsterdam time: This is the main event. Markets are looking for only a modest monthly increase in July headline inflation, with the annual rate expected around the mid-3% area. After payrolls fell in July, a softer inflation print would give the Fed a much cleaner reason to stay patient.
- U.S. core CPI: This is the part I care about more. Energy can create noise in the headline, while core services, housing and tariff-sensitive goods tell us more about whether underlying inflation is actually improving.
- U.S. real earnings: Wage growth looks different depending on what inflation is doing. With the labour market already cooling, real purchasing power becomes increasingly important for the consumer and therefore for the wider growth story.
- Oil and geopolitical headlines: Not technically an economic release, but they belong on today’s calendar. Brent is approaching $90 again, and another sharp move would immediately affect how markets interpret even a softer CPI number.
The rest of this week
- Thursday, U.S. PPI: July producer prices will show whether tariff costs, supply disruption and energy pressure are still building further up the pipeline. A soft CPI followed by firm PPI would make the inflation story less convincing.
- Thursday, UK GDP: Sterling gets its main domestic test of the week. The question is whether UK growth has held up well enough to justify the pound’s recent resilience while the Bank of England remains cautious on inflation.
- Friday, U.S. retail sales: This has become more important after the weak payroll report. If employment is cooling but consumers keep spending, the U.S. slowdown remains manageable. If retail activity weakens too, the growth story becomes harder to dismiss.
- Friday, U.S. consumer sentiment: Inflation expectations matter here as much as the headline confidence number. Rising fuel costs can quickly change how households think about future prices even before official inflation data reflect them.
Currency Outlooks:
⚖️ USD - CPI has to settle the jobs-versus-inflation argument
The dollar index is around 99.9, with EUR/USD near 1.1535 and USD/JPY around 159.4.
USD is firmer this morning, but I would not call that a proper reversal yet. A lot of it looks like caution before CPI combined with renewed geopolitical demand and higher oil.
Friday weakened the dollar’s macro foundation. Payrolls fell, previous employment was revised lower and the Fed suddenly had much less room to ignore labour-market deterioration.
Today tests the other half of that story.
If core inflation cools, the cleaner read is that Fed pressure should continue fading and dollar risks lean toward weakness. If inflation stays sticky, the market has to reconsider how quickly it reduced September tightening risk.
The dollar has cooled, but it is not broken. Today tells us whether weaker employment is enough to keep it under pressure.
🔺 EUR - Still supported, but $90 oil is becoming a problem again
EUR/USD is trading around 1.1530 to 1.1540, holding reasonably well despite the dollar firming slightly before CPI.
The euro still benefits from lower U.S. short-term rate expectations. That has been one of the cleaner drivers behind its recent recovery.
Oil is now working the other way.
Europe is a major energy importer, and Brent moving back toward $90 makes the region’s inflation-growth mix less comfortable again. Manufacturers pay more, households lose purchasing power and the ECB gets another external inflation problem without receiving stronger domestic demand in return.
Risks lean modestly toward strength while U.S. yields remain contained. That tilt weakens if CPI is firm and oil keeps climbing at the same time.
🔺 GBP - Sterling now needs UK growth to join the story
GBP/USD is holding around the 1.35 area, keeping most of its recent improvement.
The pound still has some relative policy support because the Bank of England has not declared victory over inflation. At the same time, lower U.S. rate expectations have reduced one of the biggest external pressures on GBP.
Tomorrow’s GDP report matters because sterling now needs a domestic reason to justify that resilience.
The cleaner read for me is mildly constructive before the data. If UK growth holds up, GBP has a more complete story. If GDP disappoints while oil rises, the combination becomes much less attractive because the UK would be dealing with weaker activity and renewed imported inflation.
🔺 CAD - Oil and labour resilience are finally aligned
CAD still has one of the cleaner relative stories among the majors.
Canada delivered a strong employment report last Friday, unemployment fell and now Brent is approaching $90 again. That gives the currency both a domestic labour argument and renewed commodity support.
The interesting part is that CAD strengthened before oil fully recovered. That tells us the currency is no longer relying entirely on crude.
Risks lean toward relative strength while employment resilience and higher energy prices remain aligned. The bias weakens if the oil move starts damaging global growth badly enough to overwhelm Canada’s terms-of-trade benefit.
⚖️ CHF - Geopolitical demand is back underneath the franc
CHF is receiving some renewed defensive support as Middle East tensions increase and equities become more cautious.
The limitation remains yields. Switzerland still offers a much less attractive rate profile than the United States, so CHF strength against USD is harder to sustain unless the market moves into a more serious defensive regime.
Risks are balanced with a mild defensive tilt.
If CPI is hot and equities react badly while geopolitical tensions continue building, the franc’s haven role becomes more relevant.
🔻 JPY - 160 is coming back into view
USD/JPY is around 159.4, its weakest yen level of the month and uncomfortably close to 160 again.
This is exactly why I did not treat last week’s intervention as a complete change in the yen story.
Official action pushed USD/JPY sharply lower, but the yield gap never disappeared. Now the pair has recovered as U.S. yields stabilise and higher oil creates another problem for Japan’s import bill.
There is one important difference from July. Japanese yields have also risen and expectations around further BOJ normalisation are building. Authorities have also shown very clearly that they are willing to become involved.
JPY risks still lean toward weakness on the immediate macro picture, but intervention sensitivity becomes extreme around these areas.
The mistake here would be treating a move near 160 as just another technical level. It now carries obvious policy baggage.
🔺 AUD - The RBA kept the inflation door open
AUD/USD is around 0.7045, giving back a little ground this morning after yesterday’s RBA decision.
The bank held rates at 4.35%, but the message was not relaxed. Further tightening remains possible if inflation pressure refuses to fade, and the RBA still sees upside risks around prices.
That preserves a useful rate argument for AUD.
The problem is that China’s domestic demand remains uneven and today’s broader risk mood is cautious. So AUD still needs help from global conditions even with the RBA maintaining a firm stance.
Risks lean modestly toward strength relative to currencies with softer domestic policy stories. That tilt weakens if U.S. CPI sends Treasury yields sharply higher.
🔻 NZD - Domestic support remains weaker than AUD
NZD is trading around the upper 0.58 area, slightly softer this morning.
The contrast with Australia remains useful. The RBA is openly keeping another increase possible, while New Zealand’s labour market is showing more slack, unemployment has risen and wage pressure has cooled.
That does not mean the RBNZ can ignore inflation. It does mean the domestic case for a more restrictive path is less convincing.
NZD risks lean toward relative weakness, particularly while China’s domestic growth picture remains soft. A clearly weaker U.S. CPI would improve the external backdrop, but it would not erase New Zealand’s own labour-market problem.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,380 to $4,390, holding close to recent multi-week highs after the strong rally that followed weaker U.S. employment. Softer Fed expectations and lower real yields remain the main support, while renewed geopolitical tension is adding another layer as Middle East shipping risks increase. Watch whether CPI pushes real yields lower again or forces markets to rebuild expectations for tighter Fed policy. [USD] [REAL YIELDS] [CPI]
- 🥈 Silver: XAG/USD is holding around the mid-$64 area, consolidating after its strong recent advance alongside gold. Lower U.S. rate expectations remain supportive, while the industrial side is getting a mixed signal from resilient technology investment but uneven Chinese demand. Watch whether silver continues tracking gold after CPI or becomes more sensitive to the growth implications of the inflation report. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $89.50 to $90.00 per barrel, extending its advance for a sixth session after falling below $80 only last week. Fading hopes for a U.S.-Iran agreement, attacks around key shipping routes and severely reduced traffic through Hormuz are rebuilding the supply premium, while a large reported U.S. inventory increase is limiting some of the move. Watch physical shipping flows and whether diplomatic concessions become more realistic. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: Asian equities are mixed and U.S. and European futures are showing little conviction after Wall Street fell again on Tuesday. Higher oil, caution before CPI and uncertainty around Fed policy are offsetting continued support from corporate earnings and AI investment. Watch whether equities interpret softer CPI as clean rate relief or start focusing more heavily on the weak employment picture underneath it. [CPI] [YIELDS] [RISK]
- ₿ Crypto: Bitcoin is trading around $63,700, staying relatively quiet as traditional markets wait for CPI. Softer Fed expectations provide some liquidity support, but higher oil, geopolitical uncertainty and the risk of a real-yield rebound are keeping the broader environment less convincing. Watch whether CPI produces a meaningful move in real yields and finally pushes Bitcoin out of its recent range. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is not whether CPI comes in one tenth above or below expectations.
It is whether the report changes the relationship between inflation and employment.
Friday told us the labour market is weaker than we thought. That was important because the Fed suddenly had less room to keep focusing almost entirely on inflation.
But now oil is back near $90.
That does not directly change July CPI very much. The timing is too recent. What it changes is the market’s confidence about where inflation goes next.
That is the trap today.
A soft CPI number can push yields and the dollar lower, but traders should not misunderstand it as proof that the inflation problem is finished if energy costs are already climbing again.
A firm CPI creates an even harder problem.
Then we have weaker employment, sticky underlying inflation and a fresh energy shock building in the background. That is the stagflation risk markets have been trying not to think about.
I would not overcomplicate this.
The cleaner outcome for markets is softer core inflation, contained services pressure and no further acceleration in oil. That gives the Fed room to respect the deterioration in employment.
The uncomfortable outcome is sticky core inflation with Brent pushing through $90. Then the Fed has two problems moving in opposite directions.
For FX, that means I still see the dollar as vulnerable if CPI cools properly. EUR and GBP can benefit from the softer U.S. rate story, although Europe and the UK are both exposed to expensive energy. CAD has the cleaner oil relationship right now. AUD still has RBA support underneath it.
JPY is the one I would not simplify.
The yen remains fundamentally pressured, but USD/JPY approaching 160 again means the market is walking back toward an area where authorities have already shown their hand. That makes the currency much more sensitive than the yield gap alone suggests.
My actual view today is that Friday weakened the dollar story, but CPI has to confirm it.
The mistake here would be thinking today is simply about inflation beating or missing a forecast.
It is about whether the Fed is looking at one problem again, or two.
That is the difference that matters.
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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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