Key Takeaways
- Falling after the Fed meeting, the USD extended its decline following interventions aimed at stabilizing the Japanese Yen.
- Key economic data this week, includes US jobs reports and manufacturing figures, which will influence sentiment and currency markets this week.
- Canada’s GDP beats expectations, growing 0.3% in May, which has had a limited effect on the Loonie.
- The Mexican peso has rallied on stronger-than-expected GDP growth and a weaker dollar.
USD: Back-to-back Yen intervention deepens Dollar slide
Oil starts the week on a softer footing as traders price a better chance of a deal around Hormuz. President Trump said Gulf states see an agreement as close, while new talks with Iran are expected to begin today. That has eased part of the war premium in crude and should offer some relief to US equity futures. In FX, though, the bigger story is the dollar’s broad retreat, with USD/JPY sliding back into the mid-157s.
The yen’s rebound has changed the tone across markets. Japan’s initial intervention was large, but the rally began to fade as investors questioned whether official action could fight a trend shaped by yield gaps and carry demand. The late-Friday US assist gave the move more force on back-to-back interventions and pushed USD/JPY sharply lower from recent highs. The message was clear: policymakers are no longer comfortable letting yen weakness run unchecked.
What made the operation more interesting was the reported funding choice. The US appears to have used euro reserves to buy yen, rather than selling dollars directly. That allowed Washington to support Japan without creating a cleaner read-through to US monetary policy or dollar liquidity. The motive likely went beyond the exchange rate, since a disorderly yen slide can fuel carry-trade leverage, stress risk assets and raise the odds that Japanese investors are pushed back toward domestic bonds instead of Treasuries.
For the dollar, the timing wasn’t great. The DXY ends 1.6% in the last week of July, putting it on track for its weakest weekly performance since January 2026. Softer oil, a firmer yen and calmer Hormuz headlines all limit the dollar’s usual havens. Still, intervention can jolt a market, not rewrite the macro script; for the yen rally to hold, rate spreads and policy signals need to start working in the same direction.
What’s happening in markets this week?
US ISM manufacturing and construction spending arrive Monday, followed by US factory orders and JOLTS job openings on Tuesday, alongside South Korea CPI, Japan’s 10-year bond auction and earnings from AMD and SpaceX. Wednesday brings Japan wage data, the RBI rate decision and US ISM services, giving investors another read on activity, prices and labor demand. The broader backdrop remains tied to FX markets intervention, US-Iran tensions, with late-week risk sentiment likely shaped by whether oil stays contained after President Trump called off strikes for now.
The second half of the week turns heavier. Thursday brings Japan’s 30-year bond auction, SoftBank earnings and euro-area retail sales, while Friday delivers the main events: China trade, German industrial production, the US jobs report and Canada’s employment report. Consensus looks for US payroll gains of 85,000 in July, unemployment at 4.2%, wage growth of 0.3% m/m and labor-force participation at 61.6%. With JOLTS, Challenger layoffs, ISM surveys and inflation expectations also on deck, markets will get a broad test of the US labor market and consumer backdrop. Earnings from Caterpillar, Disney, Palantir and Uber will add another layer to the AI, capex and demand story.
CAD: Canada GDP beats in May
Canada’s economy grew 0.3% in May, above the 0.2% expected. The gain followed a revised 0.1% drop in April and marked the second straight monthly increase. On a year-over-year basis, GDP rose 1.7%, also ahead of the 1.4% consensus.
The details were solid. Goods output rose 0.6%, while services gained 0.2%. Mining, quarrying, and oil and gas led the advance again, helped by stronger oil sands activity and support work tied to energy production.
The early June estimate points to another 0.2% gain. That would leave the economy up 0.8% in the second quarter. Even so, markets are not pricing a Bank of Canada rate hike this year, as the growth mix still needs to be weighed against inflation and labour-market trends.
USD/CAD briefly touched 1.399, its lowest level in more than a month, before bouncing back toward 1.404. The upbeat Canadian GDP release has not done much for the USD/CAD, which remains tied to US dollar price discovery and relative yield performance. The key data of the week comes on Friday, with job reports in both US and Canada.
MXN: Peso gains on stronger growth, softer Dollar
USD/MXN has dropped toward 17.33, with the peso reaching its strongest level in more than a month after the Fed held rates and Yen intervention sent the Dollar lower. On the domestic front, Mexico’s Q2 GDP surprised to the upside, expanding 1.5% q/q and 2.2% y/y, above the consensus. The rebound is the fastest quarterly expansion since late 2020, with all three major sectors posting growth.
The export story has added another layer of support. Mexico’s June trade surplus widened to roughly $4.09bn, well above expectations, while exports rose 34.4% y/y to about $72.5bn. Strong exports have helped cushion the economy against weaker fixed investment and prolonged trade uncertainty with the US. World Cup-related activity likely boosted parts of the Q2 rebound, especially commerce, tourism and transportation, while also flagging that growth could moderate later in the year as that temporary support fades. For Banxico, the stronger activity print is unlikely to change the next decision coming up this Thursday, where they’re expected to hold, but it makes it harder to sound too dovish and strengthens the case for a less relaxed tone.
The USD/MXN is trading below the 20-day moving average at 17.45, the 50-day at 17.41, and the 100-day at 17.46, leaving the short-term setup tilted lower for the pair. The 200-day average at 17.66 remains the larger resistance level and now looks distant unless the dollar regains momentum. Near-term support sits around 17.30, followed by 17.20–17.25.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: August 03 – 07
All times are in EST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
