Good morning traders from a sunny Amsterdam, where it is already around 25°C near IntelliTrade HQ and temperatures should reach roughly 29°C this afternoon. Sunday coffee is on the desk, the charts are quiet, and this week has a much cleaner question than last week did. U.S. jobs finally cracked, the dollar lost momentum, and now inflation has to decide whether that move has real legs.
Overall Market Sentiment:
The market starts the week cautiously risk-on.
Weak U.S. employment pushed Treasury yields lower, reduced expectations for another immediate Fed move and helped equities finish Friday at record levels. Oil is also well below July’s extremes, which has taken some pressure out of the inflation story.
But I would not call this an easy risk-on market yet. We have weaker jobs, expensive equities and inflation data coming Wednesday. That combination can stay friendly if CPI cools. It becomes much more uncomfortable if prices stay sticky.
Weekly Thesis:
The main question this week is simple: does U.S. inflation confirm the message from the weak jobs report, or fight it?
My base case is that CPI remains uncomfortable but does not fully rebuild the case for a September Fed increase. That keeps some pressure on USD and supports lower short-term yields, without turning this into a broad dollar-collapse story. USD/JPY, EUR/USD, gold and U.S. equities are the clearest places where that tension should show up, while AUD has its own major test from Tuesday’s RBA decision.
Scenario Map:
- Base case, 55%: U.S. inflation stays firm enough to keep the Fed cautious but not hot enough to erase the labour-market slowdown. Treasury yields remain below their recent highs, USD stays softer overall and equities remain supported but increasingly sensitive to valuation.
- Risk-on scenario, 25%: CPI cools more clearly while oil stays contained around the low-to-mid $80s. Fed pressure fades further, real yields move lower, USD weakness broadens and higher-beta currencies, equities and precious metals receive a cleaner macro backdrop.
- Risk-off escalation scenario, 20%: CPI surprises higher or oil jumps again on renewed Middle East disruption. Markets are then stuck with weaker employment and persistent inflation, long-term yields become unstable again and defensive demand returns across USD, CHF and gold while equities face a harder test.
What Changed Since Last Week:
U.S. payrolls turned negative, previous months were revised lower and dollar weakness finally gained a proper domestic macro reason rather than depending mainly on yen intervention and lower oil.
The 10-year Treasury yield fell toward 4.65%, the dollar index slipped to around 99.5 and U.S. equities still finished at record highs. Canada delivered the opposite surprise with a very strong employment report, while China’s weekend inflation data showed price pressure cooling again alongside still-soft domestic demand.
That strengthens the softer-USD thesis from last week, but Wednesday’s CPI is the confirmation test.
Geopolitics:
Brent finished Friday around $83.50 as markets continued balancing possible progress around the Strait of Hormuz against unresolved restrictions on shipping and the wider U.S.-Iran conflict.
The market has removed a lot of July’s energy premium, but physical flows are still not completely normal. That matters because another oil move toward $90 would immediately complicate Wednesday’s inflation reaction.
The mistake here would be assuming geopolitics has disappeared because payrolls became the bigger headline.
Macro Calendar:
The week ahead
- Tuesday, Reserve Bank of Australia: The RBA meets after recent inflation data reduced the urgency for another immediate policy increase. The decision, new forecasts and Governor Bullock’s press conference will show whether the bank still sees enough domestic pressure to maintain a firm stance, making this the main event for AUD.
- Wednesday, U.S. CPI: This is the week’s key macro release. July payrolls fell by 23,000 and earlier employment was revised lower, so a softer inflation report would significantly strengthen the case for Fed patience. Sticky inflation would create the much harder combination of weaker employment and persistent prices.
- Thursday, U.S. PPI and UK GDP: Producer inflation will show whether tariffs, supply costs and energy are still feeding pressure into American businesses. UK second-quarter GDP is the main sterling test and needs to show that restrictive policy has not caused a sharper loss of momentum.
- Friday, U.S. retail sales: After the employment surprise, consumer spending matters much more. Resilient spending would argue that household demand is still holding together, while a weaker report would make the labour slowdown harder to dismiss as one soft month.
Currency Outlooks:
🔻 USD - The burden of proof has shifted to inflation
The dollar index finished Friday near 99.5, with EUR/USD around 1.1570 and USD/JPY near 157.5.
That move matters because the reason behind USD weakness has changed.
A week ago, part of the dollar decline could still be explained by coordinated yen intervention and falling oil. Friday gave us something more important. U.S. payrolls fell by 23,000, June was revised down to only 20,000 and participation dropped to 61.4%.
The labour market is clearly softer than markets thought.
The cleaner read for me is that dollar risks now lean toward weakness, but CPI decides whether that develops into something broader. If inflation remains sticky, the Fed still has a problem and the U.S. yield advantage can rebuild quickly.
If CPI cools as employment weakens, the argument for another near-term policy increase becomes much harder to defend.
The dollar has cooled. This time, there is a stronger macro reason behind it.
🔺 EUR - Lower oil and lower U.S. yields finally work together
EUR/USD finished around 1.1570, its strongest region in several weeks.
The euro has a cleaner setup than it did during July. U.S. short-term yields have fallen, the dollar is under pressure and Brent is more than $15 below the levels that were causing serious concern for European energy import costs.
That matters because Europe does not need spectacular growth for EUR to benefit from this combination. It mainly needs the energy shock to stay contained and the U.S. rate advantage to stop widening.
Risks lean toward relative strength.
I would not overstate the European story, though. Growth remains modest and another oil shock would hit Europe quickly. EUR’s current support weakens if Wednesday’s CPI pushes U.S. yields sharply higher again.
⚖️ GBP - Thursday’s GDP has to justify sterling’s resilience
Sterling ended Friday around the mid-1.34s against the dollar after benefiting from weaker U.S. employment and softer Treasury yields.
The Bank of England remains cautious about inflation, which gives GBP some relative policy support. But this week is less about rates and more about whether the British economy can handle them.
Thursday’s second-quarter GDP report is the important test.
The mistake here would be assuming a restrictive BoE is automatically good for sterling. If policy stays restrictive while growth deteriorates, that rate advantage starts looking much less attractive.
GBP risks remain balanced. A decent growth report would strengthen the current foundation. A weak one would expose how dependent recent sterling resilience has been on USD weakness.
🔺 CAD - Canada finally has its own labour-market argument
USD/CAD finished near 1.3935, with the Canadian dollar reaching its strongest area in roughly eight weeks after Friday’s employment surprise.
Canada added around 75,000 jobs and unemployment fell to 6.4%. That is exactly the kind of domestic confirmation CAD had been missing.
Oil is no longer doing all the work. In fact, Brent around $83 is far less supportive than crude above $100 was during July.
That makes the Canadian story more interesting because CAD is now getting help from relative labour-market momentum while the U.S. side weakens.
Risks lean toward strength for now. That tilt weakens if Friday’s Canadian numbers turn out to be isolated or oil falls because global demand expectations deteriorate sharply.
⚖️ CHF - Still defensive, but not the main story this week
CHF enters the week without a major domestic catalyst.
Lower U.S. yields are helpful, while record equity markets and reduced oil stress reduce immediate demand for defensive currencies. Those forces mostly cancel each other out.
The franc becomes more relevant if CPI creates a stagflation scare or geopolitical risk pushes oil sharply higher again.
For now, risks look balanced.
🔺 JPY - Intervention finally has help from U.S. fundamentals
USD/JPY finished Friday around 157.5, well below July’s extreme near 164.
The important change is that yen support is no longer coming only from Japanese and U.S. officials.
Friday’s payroll report pulled U.S. Treasury yields lower as well. For months, intervention was fighting against a very powerful yield gap. Now that gap has at least started moving slightly in the same direction as the official effort.
That matters.
JPY risks lean toward strength while U.S. rate expectations cool and authorities remain willing to respond to disorderly weakness.
I would still not call the yen’s structural problem fixed. The yield differential remains large, and Japan’s policy normalisation is still gradual.
The cleaner read is that the resistance to yen weakness has become much stronger than it was in July.
⚖️ AUD - Tuesday belongs to the RBA
AUD enters the week with a softer dollar helping from one side and weaker Chinese domestic demand creating a problem from the other.
China’s July inflation numbers released this weekend showed consumer price pressure cooling and factory-gate inflation slowing. That reinforces the idea that parts of China’s export and technology economy remain strong while domestic demand is still much less convincing.
Then we have Tuesday’s RBA decision.
Recent Australian inflation data reduced the immediate argument for another increase. If the bank validates that softer view, AUD loses some rate support. If policymakers remain uncomfortable with domestic inflation, the currency keeps a stronger independent policy story.
I would not overcomplicate this. AUD is a central-bank currency on Tuesday and a global-risk currency again after that.
Risks are mixed heading into the meeting.
🔻 NZD - Labour slack and China keep the domestic story softer
NZD enters the week with less support than AUD.
New Zealand unemployment rose to 5.6% last week, wage pressure remained subdued and underutilisation increased. That gives the RBNZ less reason to become more aggressive even while inflation remains above target.
China’s softer domestic inflation picture adds another limitation because NZD remains sensitive to the regional growth cycle.
The softer U.S. dollar provides some support, but the cleaner relative picture still leans toward NZD weakness.
That tilt improves if global risk appetite stays strong and U.S. yields continue falling after CPI.
Cross-Asset Wrap:
- 🪙 Gold: Gold ended Friday around $4,335 to $4,350 per ounce, after jumping sharply on the weak U.S. jobs report and gaining roughly 7% across the week. The softer dollar and lower real yields were the main drivers, while geopolitical uncertainty remains supportive underneath. Watch Wednesday’s CPI because another soft inflation print would reinforce the rates backdrop behind gold’s recovery. [USD] [REAL YIELDS] [CPI]
- 🥈 Silver: XAG/USD finished near $63.25 to $63.30, rising around 3% on Friday and broadly tracking gold higher. Lower yields and USD weakness are supportive, while strong equity performance helps the industrial-demand side even as China’s domestic data remain uneven. Watch whether U.S. inflation keeps yields lower without creating a deeper growth scare. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent settled Friday near $83.55 per barrel, recovering from levels below $80 earlier in the week but remaining far below July’s spike above $100. Hormuz negotiations, restrictions on some shipping and continuing Middle East security risks are driving the premium, while expectations of improved flows limit the upside. Watch actual tanker movement and confirmed diplomatic progress through the week. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: The S&P 500 closed Friday at a record 7,757.64, while the Nasdaq finished around 26,690.62. The S&P gained roughly 3.6% for the week and the Nasdaq more than 5%, helped by lower rate expectations and strong corporate earnings. Watch whether Wednesday’s CPI allows the market to keep treating weaker jobs as policy relief rather than an early warning about growth. [CPI] [YIELDS] [EARNINGS]
- ₿ Crypto: Bitcoin is trading around $64,700 to $65,100 this Sunday, holding relatively steady after Friday’s drop in Treasury yields. Softer USD conditions are improving the liquidity backdrop, but BTC has still responded less aggressively than gold and U.S. equities to the latest rate repricing. Watch whether CPI pushes real yields lower enough to create a broader risk move. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about this week is whether inflation gives the market permission to believe Friday’s jobs report.
That may sound strange, but that is exactly where we are.
Payrolls were weak enough to change the Fed discussion. The unemployment rate fell, but participation fell with it. Previous employment was revised lower. Wage pressure cooled. Treasury yields responded.
Those are not tiny details.
But the Fed does not have one mandate.
If Wednesday’s CPI stays hot, policymakers are stuck between a labour market that is clearly losing momentum and inflation that still needs restrictive policy. That is the scenario I think traders should understand properly.
A hot CPI after weak payrolls is not simply “good for the dollar.”
It could lift short-term rate expectations, but it could also increase fears about slower growth and keep long-term market volatility high. Equities would have a harder time celebrating weak economic data. Gold could receive competing signals from higher yields and rising macro uncertainty.
If CPI cools, the picture becomes much cleaner.
The Fed has more room to stay patient. U.S. yields can remain contained. USD loses some of the policy support it carried through July. EUR benefits from lower energy costs. JPY gets help from both intervention risk and a smaller U.S. rate advantage. Gold’s real-yield story improves.
There are also a couple of currency-specific stories I would not ignore.
Canada suddenly looks different after Friday’s employment report. CAD finally has domestic support rather than depending on oil.
Australia gets the first major central-bank test on Tuesday. The RBA has to decide whether softer inflation is enough to become more patient without pretending the domestic inflation problem has completely disappeared.
And NZD is going the other way. New Zealand labour-market slack is increasing, which makes the RBNZ story less supportive even when the broader dollar environment improves.
That is why I would not reduce this week to “weak USD.”
The cleaner read for me is softer USD, but selectively.
My base case is that U.S. inflation does not fully undo Friday’s jobs shock. That leaves September Fed expectations less aggressive, keeps downward pressure on the front of the U.S. yield curve and allows the dollar to remain softer against currencies with stronger independent support.
That view weakens immediately if CPI surprises higher and oil starts climbing again.
The mistake here would be assuming Friday already settled the argument.
It changed the argument.
Wednesday decides whether the market was right to change with it.
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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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