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.

The euro has remained well supported, with EURUSD extending its recovery toward the upper end of its recent range as broad-based US Dollar weakness outweighs the lack of fresh Eurozone-specific catalysts. Softer-than-expected US labor market data, including weaker JOLTS job openings and a disappointing ADP employment report, has reinforced expectations that the Federal Reserve may not need to maintain as restrictive a policy stance if Friday’s nonfarm payrolls report also disappoints. At the same time, uncertainty surrounding negotiations over the Strait of Hormuz continues to inject geopolitical risk into markets, though hopes for a diplomatic resolution have prevented a more pronounced flight to safety. With the Eurozone calendar remaining relatively light, the euro is taking its cues primarily from US economic data and Fed expectations, leaving Friday’s US jobs report as the key near-term catalyst. A softer payrolls outcome would likely add further pressure on the US Dollar and support additional euro gains, although firm US wage growth could temper expectations for Fed easing and limit the upside.

The pound has been trading with a modestly constructive tone, though its direction continues to be driven primarily by broad US Dollar dynamics rather than UK-specific developments. Sterling has benefited from softer demand for the Greenback as easing geopolitical tensions in the Middle East and growing optimism over a potential US-Iran agreement to reopen the Strait of Hormuz have encouraged a more risk-friendly market backdrop. Domestically, last week’s Bank of England decision remains in focus after policymakers voted 6-3 to keep rates unchanged, a more hawkish split than expected, although Governor Andrew Bailey’s comments reinforced the view that disinflation remains on track and that policy will remain data dependent. With the UK parliament in summer recess and the next BoE meeting not until mid-September, domestic catalysts are limited, leaving GBPUSD largely at the mercy of incoming US economic data and Federal Reserve expectations. Attention now turns to Friday’s US nonfarm payrolls report, with a softer-than-expected outcome likely to weigh further on the Dollar and support Sterling, while a stronger labor market or firmer wage growth could revive Fed tightening expectations and limit the pound’s upside.

The Yen has stabilized after an unprecedented bout of coordinated intervention by Japanese and US authorities, with USDJPY holding near the 157.50–158.00 area after retreating sharply from four-decade highs above 164. While the intervention has succeeded in halting the Yen’s slide in the near term, investors remain skeptical that official action alone can deliver a lasting reversal without a meaningful shift in underlying fundamentals. Markets continue to view the wide US-Japan interest rate differential as the primary driver of Yen weakness, although expectations that the Bank of Japan could continue gradually normalizing policy amid persistent domestic inflation have offered some support. Attention has now shifted back to US economic data, with Wednesday’s weaker-than-expected ADP employment report reinforcing expectations that softer US labor market conditions could eventually weigh on the US Dollar and narrow the rate gap. Traders will now closely watch Thursday’s jobless claims and Friday’s Nonfarm Payrolls report, as another downside surprise could extend Yen gains without requiring further intervention, while a stronger-than-expected payrolls report would likely revive Dollar demand and renew pressure on Japanese authorities to defend the currency.

The Australian dollar has extended its recovery, climbing to fresh multi-week highs primarily on broad-based US dollar weakness and improving global risk sentiment rather than any major shift in Australia’s domestic outlook. Hopes for progress toward a US-Iran agreement and easing geopolitical tensions have weighed on the greenback, allowing the Aussie to break above the 0.7000 level, while resilient Australian fundamentals continue to provide an underlying cushion. Recent data showed both manufacturing and services activity remaining in expansion territory, employment growth remains robust, and the RBA continues to signal that it stands ready to tighten further if inflation proves more persistent, even as softer second-quarter inflation has led markets to expect rates to remain on hold next week. Looking ahead, Australian and Chinese trade data will be closely watched given China’s importance as Australia’s largest trading partner, particularly after softer Chinese services activity pointed to some moderation in momentum. At the same time, the near-term direction for AUDUSD is still likely to hinge more on the US dollar, with investors focused on incoming US labor market data and Federal Reserve expectations, while the sizeable speculative short positioning in the Australian dollar leaves room for additional upside if US data disappoints and prompts further short covering.

The euro has found support after recovering back above the 1.1500 level, helped primarily by a softer US Dollar as markets continue to price in the prospect of easing geopolitical tensions in the Middle East. Optimism that negotiations between the US and Iran could ultimately lead to the reopening of the Strait of Hormuz has weighed on oil prices, reducing inflation concerns and tempering expectations for additional central bank tightening on both sides of the Atlantic. At the same time, weaker-than-expected US JOLTS job openings have reinforced expectations that US labor market momentum is gradually cooling, shifting attention to this week’s ADP employment report and Friday’s nonfarm payrolls release for further clues on the Federal Reserve’s policy outlook. While the broader medium-term trend still favors a constructive euro, investors remain cautious about aggressively rebuilding long EUR positions amid uncertainty over the Eurozone growth outlook and the impact of recent energy market volatility, leaving EURUSD likely to remain sensitive to incoming US data and any further dovish repricing of Fed expectations.

The pound has traded with a mildly constructive tone, though price action continues to be driven far more by developments in the US Dollar than by domestic UK fundamentals. While last week’s Bank of England meeting delivered a more hawkish-than-expected voting split, Governor Bailey’s insistence that policymakers are not moving closer to another rate hike tempered any Sterling support and reinforced expectations that policy will remain data dependent. Recent UK economic data, including resilient PMI readings, has helped ease concerns about the domestic growth outlook, but has done little to materially shift interest rate expectations. Instead, investors remain focused on the US side of the equation, with this week’s key US labor market releases—including JOLTS, ADP and Friday’s Nonfarm Payrolls report—expected to play the dominant role in shaping Fed expectations and driving GBPUSD. At the same time, an improvement in broader risk sentiment and easing Middle East tensions have supported higher-beta currencies more than Sterling, leaving the pound largely rangebound as markets await fresh catalysts.

The yen has been driven by a combination of shifting interest rate expectations, improving domestic fundamentals and continued speculation around official intervention. While the Bank of Japan has maintained its hawkish bias, markets remain focused on whether stronger wage growth can reinforce the central bank’s confidence that inflation will remain sustainably around target, with upcoming cash earnings data seen as an important test of the wage-price cycle. At the same time, softer US labor market data has weighed modestly on US Treasury yields and narrowed US-Japan yield differentials, offering some support to the yen after an extended period of weakness. Lower oil prices have also been a positive development for Japan as a major energy importer, while reports pointing to easing tensions around the Strait of Hormuz have further reduced energy price pressures. Nevertheless, USDJPY remains supported on dips as markets continue to balance the prospect of additional Federal Reserve tightening against expectations for only gradual Bank of Japan policy normalization. Alongside these macro drivers, traders remain highly alert to the risk of further Japanese authorities stepping into the market to support the currency, with intervention expectations continuing to influence price action whenever USDJPY approaches elevated levels.

The Australian Dollar has strengthened as a softer US Dollar, lower US Treasury yields and an improvement in overall risk sentiment have combined with an increasingly supportive domestic backdrop. Australia’s latest PMI data reinforced the constructive outlook, with the services sector expanding at a six-month high of 53.6 in July and the composite PMI accelerating to 53.2, its strongest reading since January. The rebound was driven by the first increase in new orders in five months, firmer business confidence, continued hiring and a return to growth across both the manufacturing and services sectors, pointing to an economy that is regaining momentum. At the same time, the reacceleration in output price inflation and a build-up in backlogs suggest underlying capacity pressures are beginning to emerge, reinforcing expectations that the RBA will maintain its cautious, data-dependent stance with the possibility of additional tightening still on the table if inflation proves sticky. China’s steady economic backdrop continues to provide a modest source of support rather than a major catalyst, while lingering geopolitical uncertainty in the Middle East remains a headwind for broader risk sentiment. Looking ahead, attention now shifts to Australia’s labour market data, with another resilient employment report likely to strengthen the case for the Aussie to extend gains above the 0.7000 level, particularly if accompanied by continued US Dollar softness.

The euro remains under modest pressure as investors continue to balance a cautious European Central Bank against a broadly resilient US Dollar and lingering geopolitical uncertainty. While the ECB left interest rates unchanged after June’s hike, policymakers reiterated that inflation risks remain tilted higher because of elevated energy prices while emphasizing that future policy decisions will remain data dependent. At the same time, expectations that the Federal Reserve could still tighten policy further, with markets assigning meaningful odds of another rate hike in the months ahead, continue to underpin the Dollar and limit EURUSD upside. Developments in the Middle East remain a key driver for the single currency, with ongoing US military action against Iran and concerns over regional stability keeping safe-haven demand for the Dollar elevated, although hopes for de-escalation and lower oil prices have helped stabilize sentiment at the start of the week. Meanwhile, renewed US tariff proposals targeting major trading partners, including the European Union, have added another layer of uncertainty for the euro area outlook, while Germany’s latest Ifo survey reinforced that the economy retains recovery potential but remains vulnerable to persistently high energy costs if geopolitical tensions continue to disrupt global oil markets. Looking ahead, markets will closely watch incoming US data, including consumer confidence, alongside any fresh headlines from the Middle East for near-term direction in EURUSD.

The pound remains under modest pressure against the US dollar as markets continue to favor the greenback amid a cautious global risk backdrop and expectations that the Bank of England will leave interest rates unchanged at 3.75% at this week’s policy meeting. Recent softer UK inflation data, easing oil prices following a temporary de-escalation in Middle East tensions, and expectations that policymakers will take a wait-and-see approach have reduced the urgency for additional BoE tightening, with markets still pricing in only one or possibly two quarter-point rate hikes by the end of 2026. At the same time, lingering geopolitical uncertainty, political uncertainty in the UK, and a generally defensive tone across financial markets have supported safe-haven demand for the US dollar, while investors also remain focused on upcoming UK data, including retail sales and other activity indicators, for clues on whether the UK economy is resilient enough to keep the prospect of further BoE tightening alive later this year.

The yen remains under pressure as the wide interest rate differential between Japan and the United States continues to outweigh the Bank of Japan’s gradual tightening cycle. Although the BoJ has already lifted its policy rate to 1.00%—the highest level since 1995—and is expected to continue raising rates gradually over the coming years, policymakers have reiterated that any further normalization will remain measured, limiting support for the currency. At the same time, elevated US Treasury yields and resilient expectations that the Federal Reserve will keep policy restrictive have sustained demand for the US dollar, while ongoing geopolitical uncertainty has reinforced the greenback’s safe-haven appeal. Japanese officials continue to warn they stand ready to act against excessive currency volatility, keeping the risk of verbal or direct FX intervention alive, but markets remain focused on the persistent yield gap, which continues to favor USDJPY despite the BoJ’s tightening path.

The Australian dollar has started the week on a slightly firmer footing, supported by easing geopolitical tensions, and an improvement in broader risk sentiment. Domestically, the backdrop remains constructive, with resilient labor market conditions, expanding manufacturing and services PMIs, and an RBA that continues to signal it remains prepared to tighten policy further should inflation prove more persistent than expected. Markets will now turn their focus to Governor Michele Bullock’s remarks and, more importantly, this week’s Australian CPI report, which could materially reshape expectations for additional RBA tightening later this year. External factors also remain important, with stable Chinese economic data providing a neutral backdrop rather than a major catalyst for the Aussie. While AUDUSD continues to struggle around the psychologically important 0.7000 level, the combination of supportive domestic fundamentals, lingering expectations for further RBA tightening, and a sizeable speculative short position leaves scope for further gains should Australian inflation surprise to the upside or US Dollar weakness persist. Conversely, a softer inflation print or renewed strength in the Greenback driven by higher US yields or deteriorating risk sentiment would likely see the Australian dollar surrender recent gains.

The euro remains under pressure against the US dollar despite a surprisingly resilient set of Eurozone PMI data, as stronger-than-expected business activity has been overshadowed by broad US dollar strength and lingering geopolitical uncertainty. While Germany and the wider Eurozone both returned to stronger expansion in July, reinforcing signs of improving economic momentum, the ECB’s decision to leave rates unchanged after June’s hike and its cautious message that energy-related inflation risks remain highly uncertain has kept markets from becoming materially more bullish on the single currency. At the same time, the dollar continues to draw support from robust US services activity, elevated Treasury yields, and expectations that the Federal Reserve will keep policy restrictive, with markets still assigning meaningful odds of another rate hike later this year. Meanwhile, escalating tensions in the Middle East, renewed trade tariff concerns, and persistent inflation risks continue to underpin demand for the greenback, even as reports of possible diplomatic progress between Iran and Pakistan have helped ease oil prices and modestly improve risk sentiment. Attention now turns to this week’s Fed meeting, where the policy statement and Chair Kevin Warsh’s guidance are expected to be the primary catalysts for the next move in EURUSD.

Sterling remains under pressure against the US Dollar despite a modest late-week rebound, with stronger-than-expected UK Retail Sales and July PMI data helping to stabilize the Pound after Thursday’s sharp selloff. However, the broader backdrop continues to favor the Dollar as escalating US-Iran tensions, safe-haven demand, and renewed expectations that the Federal Reserve may need to keep policy tighter for longer outweigh the UK’s encouraging data. Markets continue to expect the Bank of England to leave rates unchanged at 3.75% next week, with policymakers likely to maintain a cautious but hawkish stance as they assess the inflationary implications of higher energy prices stemming from the Middle East conflict. While resilient UK economic data has reinforced expectations that UK rates will remain elevated into 2026, GBPUSD continues to trade primarily as a function of broad US Dollar strength and shifting Fed expectations, leaving further upside in the Pound dependent on either an easing in geopolitical tensions or a less hawkish US rate outlook.

The yen remains under pressure as the wide interest rate differential between Japan and the US continues to drive carry trade demand, even after the Bank of Japan raised rates to 1%. While the BoJ has signaled it remains open to further policy normalization, markets broadly expect it to leave rates unchanged at next week’s meeting, limiting support for the currency. Japan’s June national CPI accelerated to 1.7% year-over-year, reinforcing expectations that inflation remains on an upward path, while Finance Minister Katayama has again warned authorities stand ready to take decisive action against excessive currency moves, keeping intervention risk elevated with USDJPY near fresh 40-year highs. However, verbal intervention has so far done little to alter the broader trend, with resilient US economic data, expectations the Federal Reserve will keep policy restrictive for longer, and renewed Middle East tensions supporting higher US yields and reinforcing demand for the US dollar. Although a modest pullback in the dollar and profit-taking have capped USDJPY’s advance in the near term, the yen’s broader outlook continues to be dictated by the persistent US-Japan policy divergence and geopolitical developments ahead of this week’s Fed and BoJ meetings.

The Australian dollar remains caught between supportive domestic fundamentals and an increasingly resilient US dollar backdrop. Stronger-than-expected Australian data, including a 76.3K jump in June employment and firmer July flash PMIs, has reinforced expectations that the RBA will maintain its hawkish bias and pushed back against near-term easing expectations. However, those positives continue to be offset by broad US dollar strength as rising Treasury yields and renewed speculation that the Federal Reserve could still deliver another rate hike have weighed on global risk sentiment. Elevated oil prices, driven by Middle East supply disruption risks, have also lifted global inflation expectations, supporting higher US yields and the greenback while reducing demand for risk-sensitive currencies like the Aussie. Mixed US PMI data offered the Australian dollar only limited relief, with softer manufacturing activity offset by a much stronger services reading that reinforced the prospect of higher-for-longer US interest rates. Attention now turns to this week’s Fed meeting, where markets will closely scrutinize Chair Kevin Warsh’s guidance for clues on whether policymakers remain prepared to tighten further, a key determinant of whether AUDUSD can recover or remains under pressure.

The euro remains under pressure against the US dollar after the ECB left interest rates unchanged and struck a cautious tone, acknowledging that while inflation is moving toward target, elevated uncertainty and the full impact of higher energy prices have yet to feed through to the economy. Although the central bank reiterated its data-dependent approach and warned that persistent energy shocks pose upside inflation risks, markets interpreted the overall message as offering little urgency for additional tightening. At the same time, broad-based US dollar strength has been fueled by escalating Middle East tensions, rising oil prices, and growing expectations that energy-driven inflation could keep the Federal Reserve on a more hawkish path, with markets continuing to price a meaningful chance of further rate hikes. Risk aversion has also intensified following renewed US military threats against Iran, continued attacks in the Red Sea, and fresh US tariff plans that would include at least a 10% levy on European Union imports, adding another headwind for the common currency.

The pound remains under pressure primarily as a result of broad-based US Dollar strength rather than any significant deterioration in UK-specific fundamentals. Sterling has been weighed down by a sharp rise in geopolitical tensions in the Middle East, which has fueled demand for the safe-haven Dollar while higher oil prices have reinforced expectations that the Federal Reserve may need to keep policy restrictive for longer. Domestically, UK inflation offered a mixed picture, with headline CPI slowing to 2.6% in June, supporting expectations that the Bank of England will leave rates unchanged next week, although sticky core inflation continues to justify a cautious and relatively hawkish stance. Markets continue to price in the possibility of one or two additional BoE rate hikes into 2026, but that has done little to support the pound as investors remain focused on the widening risk premium favoring the Dollar. Attention now turns to UK retail sales and flash PMIs, which will provide a timely gauge of domestic demand and business activity ahead of next week’s closely watched BoE policy decision.

The Yen remains under pressure near 40-year lows as the wide US-Japan interest rate differential, elevated US Treasury yields and a resilient US Dollar continue to outweigh improving domestic fundamentals. June CPI and July PMI data reinforced the view that inflation pressures are becoming more entrenched and economic activity remains resilient, but markets still expect the Bank of Japan to leave rates unchanged next week despite maintaining a gradual tightening bias. Meanwhile, higher oil prices driven by Middle East tensions continue to support expectations that the Federal Reserve will keep policy restrictive for longer, sustaining carry trade demand and weighing on the Yen. Intervention risks remain elevated after Finance Minister Katayama reiterated that Japan stands ready to take decisive action in the FX market and confirmed close coordination with the US, though markets continue to believe any intervention is unlikely to produce a lasting reversal without a narrowing in the US-Japan rate differential. Attention now turns to next week’s Fed and BoJ policy meetings as the key catalysts for USDJPY.

The Australian dollar remains caught between supportive domestic fundamentals and a stronger external backdrop favoring the US dollar. While Australia’s economic data have continued to surprise on the upside, highlighted by a blockbuster June employment report and stronger-than-expected July flash PMIs that point to resilient momentum across both the manufacturing and services sectors, the currency has struggled to capitalize. Instead, the Aussie has been weighed down by broad US dollar strength as resilient US labor market data, rising Treasury yields and renewed concerns that higher energy prices could keep the Federal Reserve on a more hawkish path have boosted Fed rate expectations. At the same time, escalating US-Iran tensions have supported safe-haven demand for the US dollar while dampening broader risk appetite, a headwind for the risk-sensitive Australian dollar. Even so, the combination of firm domestic economic data and a still relatively hawkish Reserve Bank of Australia continues to provide an important medium-term underpinning for the currency, limiting the scope for more aggressive downside moves.

The euro remains pinned near the 1.1400 level against the dollar as markets balance a more hawkish European Central Bank outlook against renewed safe-haven demand for the US dollar driven by escalating Middle East tensions. The ECB is widely expected to leave its deposit rate unchanged at 2.25% on Thursday, but investors continue to price a further tightening cycle, with money markets fully discounting a September rate hike and expecting rates to finish the year well above current levels. As a result, President Lagarde’s guidance on inflation, growth and the policy outlook will be the key driver for the single currency. At the same time, the euro has struggled to capitalize on broader dollar softness as rising oil prices, fueled by the ongoing US-Iran conflict and attacks on shipping in the Red Sea, have reinforced expectations that higher energy costs could keep global inflation elevated and limit the scope for central bank easing. Those dynamics have also supported US yields and the dollar, leaving EURUSD trapped between ECB hawkishness on one side and geopolitical risk alongside Fed tightening expectations on the other, with US jobless claims the main data point ahead of the ECB decision.

The Pound remains under pressure as a softer-than-expected June inflation report reinforces expectations that the Bank of England can afford to be more patient on further tightening. Headline CPI slowed to 2.6% year-on-year from 2.8%, while easing services inflation has tempered near-term rate hike expectations, although sticky core inflation continues to argue against an aggressive easing of policy. Sterling is also facing headwinds from renewed uncertainty over the UK’s fiscal outlook, with investors awaiting Prime Minister Andy Burnham’s medium-term fiscal plans amid concerns that greater flexibility around fiscal rules could leave the UK’s debt market vulnerable given its large current account deficit and relatively low domestic savings rate. At the same time, heightened geopolitical tensions in the Middle East continue to underpin the US Dollar through safe-haven demand and persistent energy-driven inflation risks, limiting upside for GBPUSD despite intermittent optimism surrounding US-Iran diplomacy. Looking ahead, markets will closely watch UK retail sales and flash PMI data for fresh evidence on the strength of domestic demand and economic activity ahead of next week’s Bank of England policy decision, with incoming data likely to determine whether the recent repricing of BoE expectations extends further.

The Yen remains under sustained pressure, with USDJPY holding above 163.00 at its strongest levels since 1986 as the wide US-Japan interest rate differential continues to fuel carry trade demand despite persistent intervention warnings from Japanese authorities. Safe-haven demand for the Yen has been outweighed by rising US Treasury yields, elevated oil prices and renewed geopolitical tensions in the Middle East, with Japan’s heavy reliance on imported energy adding to concerns that higher energy costs will keep inflation elevated without materially improving the BoJ’s ability to tighten policy aggressively. While BoJ officials have recently signaled greater openness to raising interest rates more frequently and acknowledged that prolonged Yen weakness poses an upside inflation risk, markets remain skeptical the policy rate can rise much beyond current expectations without damaging economic growth. That leaves traders focused on this week’s national CPI report for evidence that domestic inflation is strengthening enough to justify a more hawkish BoJ, even as speculation over potential Japanese FX intervention continues to temper further Yen losses rather than reverse the broader bearish trend.

The Australian dollar strengthened after Australia’s June labor market report smashed expectations, reinforcing the view that the Reserve Bank of Australia could keep a hawkish bias despite having paused at its June meeting. Employment surged by 76,300, far above the 15,000 expected, while the unemployment rate held steady at 4.4% and participation climbed to a record 67.0%, prompting a rally in the Australian dollar and a rise in short-dated Australian bond yields as markets modestly repriced the risk of an August rate hike. Even so, the details of the report paint a more balanced picture, with quarterly unemployment still above the RBA’s own forecast and underemployment and underutilization remaining elevated, suggesting there is still underlying slack in the labor market. As a result, while the blowout jobs report keeps an August rate increase firmly on the table, it is not yet enough to make another RBA hike the base case. Beyond domestic data, broader moves in the Australian dollar continue to be influenced by US dollar strength, global risk sentiment and geopolitical developments in the Middle East.