The euro has seen some profit-taking after its sharp advance rather than a material deterioration in the single currency’s fundamentals. The July Fed minutes revealed increased concern over persistent inflation and showed that many officials believe higher rates may be required if price pressures fail to ease, providing the dollar with some near-term support. However, softer US inflation and employment data have reduced expectations for an imminent Fed move, limiting the euro’s downside. Meanwhile, the prospect of further ECB tightening remains a key source of support, with markets assigning a high probability to a 25-basis-point September hike and pricing roughly 45 basis points of additional tightening this year. Eurozone inflation rose to 2.9% in July, elevated energy prices threaten further pressure, and a somewhat firmer regional growth outlook is reinforcing the upward repricing in European rates, leaving the relative policy backdrop broadly supportive for the euro despite its latest pullback.

The pound’s downside remains limited on account of a broad based US Dollar selloff and after UK headline inflation accelerated from 2.6% to 2.9% in July, slightly above the Bank of England’s forecast, reinforcing market expectations for at least one rate hike before year-end. The details however, were less decisively hawkish, with core inflation steady, services inflation easing and wage growth slowing, while weaker UK employment figures have also highlighted risks to the economic outlook. But ultimately, the pound remains well supported by a relatively firm BoE rate path, with further gains dependent on whether incoming data validates market pricing that remains more hawkish than the consensus among economists.

The yen remains under pressure as Japan’s trade deficit widened to ¥634.5 billion in July, with a sharp rise in imports outpacing record exports and reinforcing concerns over the economic impact of elevated energy and other imported costs. Wide US-Japan interest-rate differentials continue to favor USDJPY, while fiscal concerns have added to the yen’s vulnerability. The dollar has also found some support from hawkish-leaning Fed minutes, although softer US inflation pressures and reduced expectations for a near-term Fed rate hike have limited the upside. Looking ahead, the yen’s prospects may depend heavily on whether energy prices retreat, the Bank of Japan maintains a credible path toward further tightening, or Japanese authorities intervene again as USDJPY trades near levels that could increase official concern.

The Australian dollar’s latest run of gains has been capped after a disappointing domestic labor report raised concerns about the economy and reduced the likelihood of near-term Reserve Bank of Australia tightening. Australia’s unemployment rate unexpectedly rose to 4.5% in July, while employment fell by 15,800 following June’s sharp 80,200 increase, falling well short of expectations for a 15,000 gain. Markets are consequently pricing only a modest chance of further RBA tightening, while weaker Chinese demand for Australian commodities and broader concerns over China’s economy remain additional headwinds for the currency. Nevertheless, the downside in AUDUSD has been partly contained by a softer US dollar, as cooling US inflation pressures have reduced expectations for an imminent Federal Reserve rate increase, despite the latest Fed minutes showing officials remain prepared to tighten if inflation fails to ease.

The euro remains firm near a two-month high, supported primarily by a more favorable shift in relative rate expectations. Softer US inflation, weak July employment and disappointing retail sales have reduced expectations for another Federal Reserve increase, while markets continue to price a strong likelihood of a 25-basis-point ECB hike in September as elevated energy costs keep Eurozone inflation near 3%. ECB chief economist Lane reinforced the inflation concern but maintained a cautious, meeting-by-meeting stance, suggesting that any further tightening will remain data-dependent. The euro has also drawn support from an improvement in Germany’s ZEW expectations index to 34.2 in August from 26.3, although high energy prices and transport disruptions continue to cloud the region’s growth outlook. Attention now turns to Christine Lagarde’s remarks and the FOMC minutes, while a further escalation in the US-Iran conflict remains a downside risk through its potential to strengthen the safe-haven dollar and intensify Europe’s energy burden.

The pound has come under modest pressure after softer UK labor-market data tempered expectations for near-term Bank of England tightening. Unemployment held at 4.9% in the three months to June, above the 4.8% consensus, while total wage growth slowed to 4.1%, private-sector pay growth weakened to 2.8% and vacancies fell to their lowest level in several years, collectively pointing to cooling labor demand. The figures leave markets pricing only limited BoE tightening through year-end, although renewed energy-driven inflation risks mean policymakers are unlikely to dismiss the possibility entirely. Attention now turns to UK CPI, particularly services inflation, for evidence of whether underlying price pressures remain persistent enough to offset the softer employment picture. Sterling’s downside against the dollar has nevertheless been contained by fading expectations of a September Federal Reserve rate hike following weaker US employment, retail-sales and inflation data.

The yen has strengthened modestly as investors price an increasingly high probability that the Bank of Japan will raise interest rates as early as September. Persistently above-target Japanese inflation and recent BoJ commentary have reinforced the prospect of further policy normalization, while softer US employment and inflation data have reduced expectations for a near-term Federal Reserve hike, narrowing the relative policy gap and weighing on USDJPY. However, the yen’s recovery remains constrained by concerns over Japan’s fiscal outlook, particularly the government’s proposed temporary reduction in the consumption tax on food without a clearly identified replacement revenue source. Attention now turns to Friday’s national CPI report for further evidence on whether domestic inflation is strong enough to support an imminent BoJ move.

The Australian dollar has eased despite a generally supportive domestic rate backdrop, as investors took profits following its recent rise and Australia’s wage data offered no fresh hawkish surprise. The Wage Price Index increased 0.8% in Q2 and 3.2% year-on-year, matching expectations but confirming that annual wage growth is gradually cooling. Nevertheless, RBA Deputy Governor Hauser stressed that inflation remains too high and warned that rates may need to rise again if upside risks from the Middle East conflict, the AI investment boom or weak productivity materialize, reinforcing the RBA’s tightening bias after it held the cash rate at 4.35%. The Aussie is also receiving some underlying support from a softer US dollar, with weak US retail sales, subdued inflation and the recent deterioration in employment reducing expectations for another Fed hike. Attention now turns to Australia’s July employment report for further evidence on whether the domestic economy is slowing sufficiently to ease the RBA’s inflation concerns.

The euro remains close to a two-month high, supported by growing expectations that the ECB will deliver another 25-basis-point rate hike in September as euro-area inflation remains elevated. The euro has also benefited from broad dollar weakness after softer US inflation, employment and retail-sales data reduced expectations for an imminent Fed hike. However, renewed strength in oil prices is limiting the euro’s advance by reviving US inflation concerns and safe-haven demand for the dollar, while also posing a potential terms-of-trade and growth headwind for the energy-importing euro area. The near-term balance therefore remains modestly constructive for the euro, although Wednesday’s FOMC minutes will be important in determining whether the recent pullback in Fed tightening expectations, and corresponding pressure on the dollar, can be sustained. September Fed hike expectations have fallen sharply following the latest softer US data.

The pound remains supported against the dollar, primarily reflecting a favorable shift in relative rate expectations. Softer US inflation, producer-price and retail-sales data have reduced the perceived likelihood of a September Federal Reserve rate hike, weighing on the dollar, while resilient UK growth and recent hawkish comments from Bank of England Chief Economist Pill have reinforced expectations that the BoE could raise rates at least once this year. Sterling’s advance has nevertheless become more cautious ahead of a busy UK data calendar, beginning with Tuesday’s employment report and followed by inflation and retail-sales figures. Particular attention will be paid to unemployment and wage growth, with the latter offering an important signal on domestic inflation persistence and the scope for further BoE tightening. The latest available official figures showed unemployment at 4.9%, although continuing concerns over the reliability of the UK Labour Force Survey warrant some caution when interpreting the release.

The yen remains close to a two-week low against the dollar, with hawkish Bank of Japan expectations struggling to offset concerns about the strength of Japan’s economy. Markets continue to price a high probability of a 25-basis-point BoJ rate increase in September, supported by the latest Summary of Opinions showing that several policymakers favor further tightening amid persistent upside inflation risks. However, weaker-than-expected second-quarter GDP growth, alongside signs that the expansion relied heavily on net exports, government consumption and inventories rather than domestic demand, has raised doubts about how aggressively the BoJ can proceed. At the same time, softer US economic data and reduced expectations for a September Fed hike are helping to limit additional yen selling, leaving USDJPY caught between narrowing policy-rate expectations and lingering concerns over Japan’s underlying growth momentum ahead of Wednesday’s FOMC minutes.

The Australian Dollar remains well supported, benefiting primarily from broad US Dollar weakness as softer US labor, inflation and retail-sales data have reduced expectations for a Federal Reserve rate hike in September. Domestically, sentiment improved after the RBA held the cash rate at 4.35%, with the Westpac Consumer Confidence Index rising 6.0% in August, although it remains well below year-ago levels. The RBA continues to signal that inflation is too high and has not ruled out further tightening, providing an additional yield-based tailwind for the currency, even as markets lean toward an extended pause. Attention now turns to Wednesday’s second-quarter Wage Price Index and Thursday’s labor-market report, although broadly expected outcomes are unlikely to materially alter RBA pricing. Meanwhile, escalating US-Iran tensions and the continued disruption to Middle East shipping present a mixed influence, potentially supporting the Aussie through higher commodity prices while limiting gains through weaker global risk appetite.

The euro has extended its advance to a two-month high near 1.1600, supported primarily by broad US dollar weakness as softer US data continues to reduce expectations for another near-term Federal Reserve rate hike. July retail sales fell 0.6%, while recent inflation and labor-market readings have also pointed to a cooling US economy, lowering the implied probability of a September Fed hike to around 30%. By contrast, euro-area inflation remains elevated at 2.9%, reinforcing expectations that the ECB could deliver one final 25-basis-point increase in September after holding rates steady in July. This divergence in policy expectations remains supportive, although geopolitical tensions, volatile oil prices and associated inflation risks could underpin the dollar and limit the euro’s upside. Attention now turns to Wednesday’s FOMC minutes for further guidance on the Fed’s policy outlook.

The pound has strengthened above 1.3550 against the dollar, supported by a favorable shift in relative rate expectations. Softer US retail sales, subdued inflation and recent labor-market weakness have reduced the perceived risk of a Federal Reserve rate hike in September, weighing on the dollar. Sterling is also drawing support from a persistently hawkish Bank of England, with Chief Economist Pill arguing that resilient UK growth reinforces the case for higher borrowing costs. The economy expanded by 0.4% in the second quarter, led by services, easing fears of a sharp downturn and giving the BoE greater scope to focus on persistent inflation pressures. Attention now turns to this week’s UK employment and inflation reports, which will determine whether markets strengthen expectations for additional BoE tightening.

The yen has edged higher against the US dollar, with USDJPY slipping below 159.00 as softer US data has reduced expectations for another Federal Reserve rate hike and weighed on the broader dollar. However, the yen’s gains remain limited after Japan’s economy expanded by a weaker-than-expected annualized 1.1% in the second quarter, with subdued household consumption and a 1.2% decline in business investment complicating the Bank of Japan’s path toward further tightening. At the same time, elevated inflation risks, rising Japanese government bond yields and continued concern over excessive yen weakness are keeping expectations of another BoJ rate hike alive, while the threat of renewed currency intervention provides an additional layer of support near the 160.00 area. For now, the yen remains caught between a narrowing US-Japan policy gap and doubts over whether Japan’s fragile domestic economy can withstand faster monetary tightening.

The Australian dollar has extended its recovery through 0.7100, supported by a widening divergence in central-bank expectations. The RBA retained a hawkish bias at its latest meeting, with Governor Bullock keeping the option of further tightening firmly open if inflation fails to moderate, while some analysts continue to anticipate one more rate increase later this year. In contrast, weaker US inflation data and July’s unexpected 0.6% decline in retail sales have reduced expectations for a September Fed hike and weighed on the US dollar. Improved risk sentiment and gains in Chinese equities have provided an additional tailwind for the growth-sensitive Aussie, although uncertainty surrounding China’s economic outlook and elevated geopolitical risks may limit further upside.

The euro is trading firmer against the dollar, supported primarily by a widening shift in relative rate expectations after softer US inflation data reduced the likelihood of another Federal Reserve hike. July US producer prices were unchanged on the month, below the 0.2% forecast, while core PPI rose a modest 0.2%, reinforcing the cooling signal from CPI and weighing on the dollar. In contrast, expectations for further ECB tightening have strengthened, with a Reuters poll showing 83% of economists expect a final 25-basis-point hike in September as euro-area inflation remains above target. The euro has also drawn support from the region’s resilient 0.4% second-quarter growth and an improvement in August investor confidence. However, upside remains restrained by geopolitical tensions surrounding Russia and NATO territory, the US-Iran confrontation and renewed Red Sea attacks, which continue to underpin safe-haven demand for the dollar.

The pound has strengthened against the US dollar, supported by a combination of resilient UK growth and a softer US inflation backdrop. UK GDP expanded by 0.4% in the second quarter, in line with forecasts but slowing from 0.6% previously, with services remaining the principal growth engine and the economy proving relatively resilient despite the Middle East conflict and higher energy costs. The data reinforced the Bank of England’s comparatively hawkish policy outlook, with Chief Economist Pill arguing that the strength of activity supports the case for higher interest rates as inflation remains above target. At the same time, cooler-than-expected US CPI and PPI readings have reduced expectations for a September Fed hike and weakened the dollar, although geopolitical risks and the threat of further energy-price pressure remain potential headwinds for sterling. Attention now turns to US retail sales for the next directional catalyst.

The yen remains under pressure against the dollar, with the boost from recent coordinated US-Japan intervention fading as Japan’s still-wide interest-rate disadvantage keeps carry-trade demand intact. Softer US inflation and weak employment data have reduced expectations for an immediate Federal Reserve hike, while rising speculation that the Bank of Japan could tighten again as early as September has offered the yen some support. However, Japan’s low borrowing costs and lingering fiscal concerns continue to limit any sustained recovery. With the yen approaching the closely watched 160 level, intervention risk is rising again, leaving USDJPY caught between a softer Fed outlook and the threat of further Japanese policy action on one side, and the persistent US-Japan rate gap on the other.

The Australian dollar has come under modest pressure as evidence that the RBA’s earlier tightening is increasingly weighing on household demand and housing activity offsets the central bank’s continued hawkish bias. Assistant Governor Kent said this year’s three rate increases are having their intended effect through higher mortgage payments, weaker spending and tighter financial conditions, but stressed that further tightening remains possible if inflation risks intensify, particularly through persistently high oil prices, resilient global demand or disappointing productivity. The RBA kept the cash rate at 4.35% this week after raising it by 75 basis points since February, leaving markets pricing a meaningful risk of another increase by year-end. Meanwhile, softer US producer inflation has reduced expectations for a September Fed hike and weakened the broader US dollar, limiting the Aussie’s downside, with attention now turning to US retail sales and RBA Governor Michele Bullock’s parliamentary testimony for the next policy signals.

The euro remains broadly steady against the dollar, with the single currency continuing to consolidate as it lacks a fresh domestic catalyst following the ECB’s late-July meeting. EURUSD has received some support from softer US rate expectations after July headline and core CPI eased to 3.4% and 2.5% year-on-year respectively, prompting markets to reduce the probability of a September Federal Reserve rate hike to around 40%. However, the euro has struggled to capitalize meaningfully as persistent US-Iran tensions continue to underpin safe-haven demand for the dollar, while elevated energy-related uncertainty remains a particular risk for the eurozone economy. Attention now turns to eurozone industrial production, followed by US producer prices and jobless claims, with the relative ECB-Fed policy outlook and developments in the Middle East likely to remain the dominant drivers of the pair.

The pound remains caught between resilient UK activity and a firm US dollar, with preliminary GDP showing the economy expanded by 0.4% in Q2, matching expectations but slowing from 0.6% in Q1. The details were encouraging, as June GDP rose a stronger-than-expected 0.3%, driven by a 0.4% expansion in services and strength in retail and professional activities, although weak manufacturing and industrial production exposed an uneven underlying picture. Overall, the data should do little to alter the Bank of England’s near-term outlook, with respectable growth arguing against policy easing while elevated energy prices and related inflation risks keep the possibility of tighter policy in play. Sterling’s upside against the dollar nevertheless remains constrained by geopolitical uncertainty, safe-haven demand for the greenback and speculation that persistent US inflation pressures could prompt the Federal Reserve to raise rates, leaving GBPUSD broadly anchored around 1.3500.

The yen remains pinned near 159.50 against the dollar as Japan’s still-low interest rates and the resulting carry-trade appeal continue to outweigh the impact of softer US inflation and reduced expectations for a near-term Fed hike. However, further yen weakness is being constrained by the threat of renewed intervention, particularly as USDJPY approaches the psychologically important 160.00 level, after Japan’s Finance Ministry confirmed that its latest yen-buying operation was coordinated with the US Treasury. The policy backdrop has also turned somewhat more supportive, with the Bank of Japan’s July meeting summary showing that officials discussed accelerating rate hikes amid upside inflation risks, raising the possibility of another move as early as September. For now, traders remain reluctant to push USDJPY materially higher without testing the resolve of US and Japanese authorities, while the upcoming US PPI report could influence US yields and the rate differential that remains central to the yen’s direction.

The Australian dollar has eased back after failing to sustain its push above 0.7100, as the US dollar’s broader recovery prompted some profit-taking. Fundamentally, the Aussie remains underpinned by the RBA’s hawkish bias after it held rates at 4.35% but warned that further tightening remains possible if inflation and demand fail to cool sufficiently. Assistant Governor Kent reinforced that message on Thursday, saying inflation risks remain skewed to the upside, while markets now assign roughly a 54% probability of another increase by December. Nevertheless, the RBA’s decision not to raise rates immediately, alongside expectations that softer labor-market conditions will eventually temper wage and price pressures, has limited the currency’s response. Meanwhile, benign US inflation has reduced expectations for a September Fed hike, but the dollar has retained enough underlying strength to keep AUDUSD below its recent highs ahead of the US PPI release.

The euro remains confined to a narrow range around the mid-1.1500s against the US dollar, with investors reluctant to take fresh positions ahead of today’s US CPI report. The single currency has struggled to capitalize on the sharp deterioration in the latest US employment data as renewed gains in oil prices, driven by continued uncertainty over the Strait of Hormuz and escalating attacks in the Red Sea, have revived inflation concerns and kept the possibility of further Federal Reserve tightening alive. Elevated US Treasury yields and safe-haven demand have consequently supported the dollar and capped EURUSD, while the ECB’s relatively cautious policy stance offers the euro little independent momentum. Germany’s final July HICP reading is also in focus, although the pair’s near-term direction will likely be determined primarily by the US inflation data and its implications for the Fed outlook.

The Pound has slipped back toward 1.3500 against the US Dollar, with the latest move driven primarily by a firmer greenback ahead of US CPI and renewed caution surrounding the Iran conflict and the Strait of Hormuz. Higher oil prices are complicating the outlook by increasing UK inflation risks, potentially keeping the Bank of England cautious about easing even as they threaten growth. The BoE held Bank Rate at 3.75% in July in a 6–3 vote, leaving sterling supported by expectations that policy will remain restrictive for now. However, one bank notes that recent pound movements have been heavily sentiment-driven, with options markets showing reduced demand for downside protection. Attention now turns to Thursday’s UK second-quarter and June GDP releases, which should provide the next major domestic test of whether the economy is strong enough to sustain the pound’s relatively resilient backdrop.

The yen remains under heavy pressure, with USDJPY climbing toward 160 as the impact of the recent coordinated US-Japan intervention continues to fade. The wide interest-rate gap between Japan and other major economies is keeping carry-trade demand alive, while concerns over Prime Minister Takaichi’s expansionary fiscal policies and the economic impact of prolonged energy disruptions are adding to the yen’s weakness. Improving Japanese business sentiment and growing expectations for another Bank of Japan rate hike, potentially as early as September, have provided little support, suggesting that investors remain doubtful that gradual policy tightening will be enough to reverse the currency’s broader decline. At the same time, rising oil prices have revived US inflation concerns, supported Treasury yields and helped the dollar recover ahead of today’s US CPI release. The yen therefore remains vulnerable, although the risk of renewed official intervention could limit the extent or speed of further losses.

The Australian Dollar has slipped mildly against the US Dollar as traders adopt a cautious stance ahead of key US inflation data, which should help determine whether the Federal Reserve raises rates in September. Domestically, the RBA’s unanimous decision to hold the cash rate at 4.35% offered the Aussie some underlying support, with Governor Bullock maintaining that another increase remains possible as inflation is still too high. However, softer consumer spending, housing activity and labor-market conditions suggest policy is already restraining the economy, leaving forecasters divided over whether further tightening will be required. Rising energy prices associated with the Middle East conflict add to Australia’s inflation risks and could keep a late-year RBA hike in play, although renewed geopolitical uncertainty is simultaneously supporting the safe-haven US Dollar and limiting upside.

The euro is holding broadly steady around the mid-1.1500s against the dollar, close to its strongest level since mid-June, with recent support coming primarily from broad dollar weakness after the disappointing US employment report reduced expectations for an immediate Federal Reserve rate hike. The single currency has also drawn modest support from improving regional sentiment, with the eurozone Sentix investor-confidence index moving into positive territory in August for the first time in several months. However, upside remains limited by subdued euro-area growth and uncertainty surrounding the inflationary consequences of the Middle East conflict, which prompted the ECB to leave rates unchanged in July and retain a data-dependent stance. Renewed gains in oil prices as US-Iran negotiations stall are especially important for the eurozone as a major energy importer, potentially weakening growth while complicating the ECB’s inflation outlook. Near-term direction therefore remains largely dollar-driven, with traders awaiting Wednesday’s US CPI and Thursday’s PPI figures for clearer guidance on whether the Fed could still raise rates later this year.

The pound remains firm around 1.3500 against the dollar and close to a three-week high, supported by a modestly softer US rate outlook after weak payrolls prompted markets to price out a near-term Federal Reserve hike. Sterling has also retained some support from expectations that the Bank of England could still tighten policy later this year, although those expectations have been scaled back and may leave the currency vulnerable if incoming UK data disappoint. The BoE held Bank Rate at 3.75% in July by a 6–3 vote, reflecting continued concern over inflation and the potential impact of elevated energy prices linked to uncertainty surrounding the Strait of Hormuz. Attention now shifts to Thursday’s UK GDP release, with growth expected to moderate from the first quarter and the June economy potentially contracting slightly, while Wednesday’s US CPI report will determine whether the dollar’s recent recovery can extend. Overall, GBPUSD remains underpinned by relative rate expectations, but its next decisive move will depend on the UK growth figures and the US inflation signal.

The yen remains fundamentally weak near 159 per dollar, having surrendered almost half of the gains generated by last week’s rare joint US-Japan intervention, as wide interest-rate differentials and carry demand continue to outweigh the threat of renewed official action. Thin liquidity during Japan’s Mountain Day holiday has kept trading subdued, although the approach of 160 leaves markets highly sensitive to another intervention attempt. The policy backdrop is becoming more supportive: the Bank of Japan’s latest Summary of Opinions revealed growing concern that inflation risks could require faster tightening, strengthening expectations for another rate increase as early as September after the policy rate was raised to 1% in June. Nevertheless, intervention alone is viewed as unlikely to reverse the yen’s longer-term decline without sustained BoJ tightening, while elevated oil prices are worsening Japan’s import outlook and lifting US Treasury yields. Attention now turns to US inflation data, which will shape Fed expectations and the US-Japan yield spread, leaving USDJPY caught between renewed intervention and BoJ hike risk on one side and still-favorable dollar carry dynamics on the other.

The Australian dollar has edged lower following the Reserve Bank of Australia’s widely expected decision to leave the cash rate unchanged at 4.35%, with the initial decline reflecting some disappointment that the Middle East conflict has delivered a smaller inflationary impact than previously feared. However, the downside has remained limited, with the RBA maintaining a hawkish bias by warning that inflation is not expected to return to the midpoint of its target range until late 2027, that the risks remain tilted to the upside and that it is prepared to raise rates again if necessary. The Aussie therefore remains near its strongest level since mid-June, supported by Australia’s comparatively restrictive rate outlook, although signs of softer household demand and housing activity argue against an imminent hike. Attention now shifts to Governor Michele Bullock’s guidance and this week’s US CPI and PPI releases, which will determine whether the recent weakness in the US dollar can persist and provide the next directional catalyst.

The euro begins the week consolidating near two-month highs against the US dollar, with EURUSD holding around 1.1550 after Friday’s unexpectedly weak US jobs report sharply reduced expectations for another Federal Reserve rate hike. The US economy lost 23,000 jobs in July, while downward revisions and softer wage growth reinforced signs that the labor market is cooling, although the decline in unemployment to 4.1% kept the report from being uniformly weak. The pair has since struggled to extend its advance as the dollar attracts modest safe-haven demand amid continuing uncertainty over the Strait of Hormuz, while higher oil prices raise renewed inflation concerns and represent a particular economic risk for energy-importing Europe. Attention now turns to Wednesday’s US CPI report, which will be critical in determining whether markets further unwind Fed tightening expectations or revive the prospect of a September hike. Overall, the euro remains supported near recent highs, but its latest strength is primarily a reflection of softer US rate expectations rather than a decisive improvement in the Eurozone’s domestic fundamentals.

The pound has started the week consolidating the latest run of gains after GBPUSD briefly moved above 1.3500 on Friday, with renewed uncertainty surrounding the Strait of Hormuz supporting the safe-haven US Dollar and keeping oil-driven inflation risks in focus. Sterling’s downside remains limited, however, after a sharply weaker US employment report materially reduced expectations for a September Federal Reserve rate hike. Domestically, the backdrop is mixed but broadly supportive: UK services activity improved in July and the Bank of England recently voted 6–3 to hold Bank Rate at 3.75%, maintaining a cautious stance as it assesses the inflationary impact of higher energy prices. Attention now turns to US inflation data and Thursday’s preliminary UK second-quarter GDP report, with the latter set to indicate whether the economy maintained momentum after expanding 0.6% in the first quarter. Overall, near-term direction remains heavily dependent on Middle East developments and relative UK-US rate expectations, leaving sterling supported on dips but struggling to extend its advance while geopolitical demand underpins the Dollar.

The Yen remains under pressure, with USDJPY climbing back above 158.00 as the initial boost from coordinated US-Japan intervention continues to fade and investors refocus on Japan’s underlying fiscal challenges and wide interest-rate disadvantage against the United States. Sentiment was further weighed down by an unexpected JPY 92.3 billion current account deficit in June, Japan’s first in 17 months, although the deterioration was largely driven by unusually large dividend payments to overseas investors and the first-half balance remained at a record surplus. Meanwhile, the Bank of Japan’s July Summary of Opinions revealed growing concern over inflation and support among several policymakers for faster rate hikes, increasing the possibility of another move as early as September, but this hawkish signal has so far provided only limited support to the currency. Renewed US-Iran tensions and associated demand for the Dollar have added to the pressure, while the next major direction for USDJPY will depend on the US jobs report and whether it reinforces expectations for further Fed tightening or helps narrow US-Japan yield differentials.

The Australian dollar begins the week consolidating gains, with additional topside limited for now as renewed US-Iran tensions surrounding the Strait of Hormuz support safe-haven demand for the US dollar and offset some of the pressure generated by Friday’s weak US employment report. Domestically, attention is firmly on Tuesday’s RBA decision, with the central bank widely expected to leave the cash rate unchanged at 4.35%, although persistent underlying inflation and a resilient labor market should keep its guidance cautious and the possibility of another increase alive. Australian headline inflation eased to 3.8% in June, but trimmed-mean inflation remained elevated at 3.6%, while unemployment stood at a still-low 4.4%, leaving policymakers with little urgency to signal an easing bias. Australian Bureau of Statistics The domestic economy therefore remains relatively supportive for the Aussie, but the near-term direction will depend heavily on the RBA’s updated forecasts and Governor Bullock’s assessment of further tightening risks. Beyond Australia, mixed Chinese activity data are providing stability rather than a meaningful tailwind, leaving broader risk sentiment, Middle East developments and the direction of the US dollar as the other major drivers.

The Euro has come back under some pressure into the end of the week, with EURUSD retreating toward the 1.1520 area as renewed tensions around the Strait of Hormuz revive safe-haven demand for the US Dollar. The rebound in oil prices and US Treasury yields has also worked against the single currency, with higher energy costs threatening to complicate the inflation outlook on both sides of the Atlantic and reinforcing expectations that central banks may need to maintain restrictive policy for longer. On the domestic front, the latest Eurozone data have been less encouraging, with June retail sales unexpectedly falling 0.3% month-on-month and annual growth slowing to just 0.7%, highlighting continued weakness in household demand. Meanwhile, the ECB remains firmly data dependent after leaving rates unchanged at its latest meeting, with policymakers continuing to flag geopolitical and energy-price risks as potential sources of renewed inflation pressure. Overall, the Euro remains caught between a relatively cautious ECB and soft regional growth on one side, and shifting expectations around US monetary policy and geopolitical risk on the other, leaving today’s US employment report as the next major catalyst for EURUSD direction.

The Pound has come under renewed pressure, with GBPUSD slipping back toward 1.3450 as narrowing UK-US yield differentials and a firmer US Dollar outweigh an improvement in UK political sentiment. Sterling’s domestic backdrop remains complicated by the combination of higher oil prices and softer growth concerns, which raises the risk of more persistent inflation while presenting the Bank of England with an increasingly difficult policy trade-off. This follows last week’s BoE meeting, where Governor Andrew Bailey maintained that the disinflation process remains on track and played down the need for additional tightening, limiting support from UK rate expectations. At the same time, fading concerns surrounding the recent UK political transition and the new government’s emphasis on fiscal responsibility have provided some underlying support for the Pound. Externally, however, renewed tensions surrounding the Strait of Hormuz have revived safe-haven demand for the US Dollar, while higher energy prices and hawkish Fed rhetoric have reinforced concerns that US rates could remain elevated. Attention now turns to today’s US employment report, which could prove an important catalyst for GBPUSD through its impact on Fed expectations, Treasury yields and the broader direction of the Dollar.

The Yen remains under pressure, with USDJPY consolidating around the mid-158.00s after rebounding from the 155.20 area reached following the recent joint US-Japan intervention. The latest domestic data have reinforced the Yen’s underlying challenges, with household spending unexpectedly falling 3.3% year-on-year in June, marking a seventh consecutive decline and raising doubts over whether the Bank of Japan will be in a position to deliver another rate hike as soon as September. Fiscal concerns and the vulnerability of Japan’s economy to elevated energy prices are adding to the pressure, while the wide US-Japan yield differential continues to favor the Dollar. At the same time, lingering Middle East uncertainty and renewed inflation concerns have supported US Treasury yields and the Greenback, further limiting the Yen’s ability to build on its intervention-driven gains. The broader picture therefore remains one in which official intervention can provide meaningful short-term support for the Yen, but a more sustained reversal will likely require a shift in the underlying fundamentals, particularly a firmer BoJ tightening path or a meaningful decline in US yields. Attention now turns to the US jobs report, which could prove important for USDJPY by reshaping expectations around the Fed and the direction of US yields.

The Australian Dollar has lost some momentum into the end of the week, with AUDUSD slipping back from the 0.7050 area as renewed tensions around the Strait of Hormuz have revived safe-haven demand for the US Dollar and pushed oil prices and US yields higher. The domestic backdrop remains comparatively supportive: Australia’s labour market is resilient, July PMIs showed a notable improvement in activity, and inflation remains sufficiently sticky to keep the RBA cautious, even though softer recent inflation readings have reduced the urgency for another hike. Attention now turns to the RBA’s August 11 meeting, with markets largely expecting rates to remain unchanged but still leaving some risk of additional tightening later in the year. China remains a mixed influence: July exports rose a strong 23.9% year-on-year and imports 27.5%, but both slowed from June and the trade surplus narrowed to $112.5 billion, reinforcing the view that China is stabilizing rather than providing a powerful new tailwind for the Aussie. For now, the AUD therefore retains a modestly constructive underlying fundamental profile, but near-term direction is being dictated more by global risk sentiment, oil and the US Dollar, with today’s US jobs report the next major catalyst for whether AUDUSD can make another sustained push through 0.7000 or comes under renewed pressure.