- Crude concerns. Oil hits $100 again after surging more than 35% month-to-date to its highest since May. Escalating Middle East tensions have intensified concerns that a prolonged conflict could keep global energy prices elevated.
- Another chokepoint. Iran-backed Houthis reportedly attacked two Saudi tankers near the Bab el-Mandeb Strait in the Red Sea, putting another critical global trade and energy corridor under pressure.
- Tariff tensions return. President Trump’s decision to impose fresh tariffs on more than 60 countries threatens to further fragment global supply chains.
- Wild ride. KOSPI volatility remains elevated as sharp semiconductor-led swings continue to trigger trading halts in South Korea, hurting risk sentiment globally.
- Burnham bounce. New UK PM Andy Burnham has wasted little time unveiling measures aimed at easing cost-of-living pressures. Ten-year gilt yields have pushed above 5%, though rising global energy costs remain the dominant driver.
- Bund voyage. The ECB left rates unchanged but hinted at a September hike. Ten-year bund yields rose to their highest level since 2011, but the euro slipped as markets focused on growth headwinds.
- Fed-up. Despite last week’s softer US inflation print, the probability of a Fed rate hike this month is back near 40%, adding to pressure on risk assets.
- FX flow. The USD is outperforming through safe-haven demand and higher energy prices, with a flatter US yield curve reinforcing support for the greenback.
Global Macro
Disinflation broadens, growth holds up
US mixed. US initial claims dropped to 187k vs 212k expected, the lowest of 2026 and close to multi-decade lows, while continuing claims slipped to 1.796m. The activity backdrop was not all positive: the US leading index fell 0.2% vs -0.1% expected, with weak consumer expectations and building permits offsetting support from financial components. The clean read is that the labor market still looks tight, but leading indicators are not pointing to a broad reacceleration.
ECB pauses. The ECB held the deposit rate at 2.25%, as expected, after June’s hike. The hold was not dovish: policymakers kept a data-dependent tone and continued to flag the inflation risks tied to the Middle East energy shock and possible second-round effects. The euro reaction was limited because the decision was fully priced and September remains the more important policy question.
UK mixed. The UK labour market held up better than expected, with unemployment unchanged at 4.9% vs 5.0% expected and employment rising by more than forecast. UK CPI then cooled to 2.6% y/y from 2.8%, below expectations around 2.7%, but core CPI stayed at 2.6% and services inflation eased only slightly to 3.6%, leaving the Bank of England with a cleaner headline but still sticky domestic pressure.
Canada CPI. Canada CPI cooled to 2.8% y/y vs 3.0% expected and fell 0.4% m/m, with gasoline doing most of the work as energy pressure reversed. Core also improved, with the BoC’s median at 1.9% and trim at 1.8%, both down from May and at multi-year lows. The print gives the Bank of Canada more room to stay patient, especially with headline inflation back below the top of the target band.
Week ahead
A week filled with policy chatter
Hawkish, but how much more? All eyes are on next week’s July FOMC policy meeting. June surprised markets with a distinctly hawkish tilt. At that meeting, roughly half of FOMC participants signalled that they expected at least one rate hike before year-end, while some projected as many as two. Even so, with Chair Kevin Warsh remaining committed to providing as little forward guidance as possible, and with no updated economic projections due this month, the scope for additional hawkish signals appears somewhat limited.
No move, for now. The Bank of England will also hold its policy meeting next week. Andrew Bailey has shown little urgency to raise rates in recent months, with only two MPC members voting for a 25bp increase at the previous meeting. Markets expect no change next week, although they continue to price in nearly two rate hikes by year-end.
Inflation takes centre stage. Several key inflation releases are also scheduled for next week. In the US, June’s Personal Consumption Expenditures (PCE) report will be published. As the Fed’s preferred measure of inflation, it carries particular significance for the policy outlook. Inflation data for July are due across the euro area, both at the national level and in aggregate. These reports will be closely scrutinised as investors assess the growing possibility of rate hikes in September.
FX views
A higher bar for market angst
USD A tentative dollar rebound. The US dollar has edged higher this week, gaining c.0.6% against the euro as oil prices surged back above $100 per barrel amid the continued standoff between the US and Iran. USD/JPY has reached its highest level in nearly 40 years, while USD/CHF has risen above its one-year highs. The Swiss franc’s safe-haven appeal has weakened in the face of geopolitical tensions that are driving energy prices higher. Nonetheless, demand for the dollar has so far been more subdued than during the initial escalation of the conflict. Moderating factors include more balanced dollar positioning and the view among investors that the renewed escalation is part of a broader strategy aimed at securing greater leverage at the negotiating table. The US Dollar Index (DXY) has reclaimed its 21-day moving average, a sign of renewed buying interest, although it remains below its late June high of 101.800. Next week’s Federal Reserve policy meeting could provide the catalyst for a further move higher.
EUR No joy for the euro. EUR/USD edged lower this week despite hawkish signals from the ECB’s July policy meeting, with the US dollar retaining the upper hand. The common currency nevertheless heads into the weekend stronger against the Swiss franc, Japanese yen, and sterling. ECB President Christine Lagarde stressed that inflation risks remain tilted to the upside and that the Governing Council no longer views inflation and growth risks as more balanced, as it did before the conflict re-escalated. The hawkish tone reinforced expectations of a September rate hike, with another potentially following before year-end. However, markets had already repriced in a more hawkish direction ahead of the meeting, leaving little scope for a positive surprise to support the euro. Meanwhile, higher oil prices continue to worsen the euro area’s terms of trade, offsetting support from rising rate expectations. EUR/USD remains trapped within a 1.1350-1.1450 range, although downside risks may prevail if signs of de-escalation fail to re-emerge.
GBP The tide turns. Sterling’s strong run finally lost momentum this week, with the pound retreating against most major peers after reaching multi-month and multi-year highs across several crosses. What began as a bout of profit-taking in an increasingly stretched market evolved into a broader reassessment of the drivers that had supported GBP through much of June and early July. The key shift has been the re-emergence of the terms-of-trade channel. Rising oil prices amid renewed Middle East tensions have favoured the USD and commodity-linked currencies such as the NOK and CAD, while weighing on net energy importers. For sterling, this has offset what had previously been a supportive mix of carry demand, low volatility and easing UK political risk. Domestic developments were largely ignored. Stronger-than-expected retail sales and PMIs failed to lift the pound, while concerns around Prime Minister Burnham’s early spending commitments revived questions over fiscal discipline. Technically, GBP/USD risks drifting back towards key support near 1.32, while GBP/EUR has retreated from one-year highs above 1.18 and is challenging support around 1.17. Next week’s Bank of England meeting will test whether hawkish rate expectations have run too far, with any dovish repricing posing additional downside risk to sterling.
CHF Carry still weighs. The Swiss franc remained under pressure this week as rising energy prices widened rate differentials in favour of higher-yielding currencies. Despite elevated geopolitical risks, CHF has attracted little of the haven demand typically seen during periods of uncertainty, while market volatility remains subdued. That combination continues to favour carry trades, with the franc remaining an attractive funding currency and weighing on its performance. However, this regime remains vulnerable to a sharp reversal should markets become less tolerant of higher energy prices, triggering a rise in volatility and an unwind of carry positions. Technically, USD/CHF is trading near its highest level in a year, while EUR/CHF has erased almost all of its YTD losses and is back near 0.93. Both pairs are now approaching their respective 100-week moving averages, key levels that could determine whether CHF weakness extends further or begins to stabilise.
CAD Rates over tariffs. USD/CAD is trading closer to a rates story than a tariff-premium story, even after the White House announced targeted 50% tariffs on about USD20bn of Canadian goods tied to autos, alcohol and dairy. The measures have a 30-day implementation window, broad exemptions and a narrow scope, which leaves markets treating them more like leverage for CUSMA talks than a full break in North American trade. The bigger short-term driver remains yield spreads: US front-end yields have been more sensitive to higher oil prices, while Canadian yields have stayed quieter after June CPI cooled to 2.8% and the BoC’s core measures eased. The USD/CAD trades around 1.408, below the 20-day average at 1.4138 but still above the 50-day at 1.4016, 100-day at 1.3872 and 200-day at 1.3851. That keeps the broader USD/CAD uptrend alive, but the loss of momentum below the 20-day average makes 1.4015–1.4000 the key support zone. A break below that area would shift focus back to 1.3870–1.3850, while a move back above 1.4138 would reopen the path toward 1.4200. Next week, all focus will be on the Fed meeting on Wednesday and ending July with GDP figure for the month of May, expected to come at 0.2% MoM.
AUD Strong headline jobs data. Australia’s labour market beat expectations in June, with employment rising by 76.3k versus forecasts of 16.4k. The unemployment rate held at 4.4%, while participation climbed 0.3 percentage points, highlighting strong hiring momentum. However, the details were less convincing. Hours worked rose only 0.2% despite the sharp employment gain, and underemployment edged up to 6.5%. The 10-year Treasury yield climbed to 4.69%, while jobless claims fell to 187k, supporting the US dollar. AUD/USD is down 0.2% vs US dollar for the week of July 20th. The pair remains 4% below its 6 May high of 0.7278. Resistance is at the 100-day EMA (0.7004), followed by the 50-day EMA (0.7007). Support sits at 0.6900, then 0.6800.
CNH Support measures aid sentiment. Chinese policymakers stepped up efforts to support market confidence after leaders from the NDRC and CSRC met to discuss market stability. Following the meeting, four major insurers — Ping An, China Life, China Pacific and New China Life — reaffirmed their commitment to domestic equities and pledged additional long-term investment. The coordinated move should support domestic sentiment, although weaker global risk appetite may limit the near-term impact. At the same time, Brent crude remains above US$99 per barrel, increasing China’s import costs and acting as a headwind for the yuan. USD/CNH remains near a three-year low on a longer-term view. Resistance is at the 21-day EMA (6.7810), followed by the 50-day EMA (6.7914). Support is located at 6.7700.
JPY BoJ keeps its options open. Reports suggest the Bank of Japan could raise rates faster than the widely assumed pace of one quarter-point every six months. While the headlines sound hawkish, the message is straightforward: policymakers are keeping their options open rather than committing to a fixed path. Officials continue to assess whether yen weakness is feeding into inflation and whether broader price pressures warrant a quicker response. For now, the reports offer little new guidance beyond reinforcing policy flexibility ahead of the 31 July BoJ meeting. Meanwhile, the 10-year US Treasury yield at 4.69% continues to favour the US dollar and weigh on the yen. JPY is down 0.8% vs the US dollar in the week of July 20th. USD/JPY reached 163.99 on 23 July, its highest level since 1986, and remains close to that peak. Support is at the 21-day EMA (162.41), followed by the 50-day EMA (161.29) and 100-day EMA (159.88). Resistance stands at 163.99, with 165.00 the next key hurdle. A break above 165.00 would reinforce the upward trend, while a move below the 21-day EMA could signal a deeper pullback.
MXN Peso range tested USD/MXN started the week with the peso outperforming, moving from around 17.50 toward 17.38 as carry demand held up despite a firmer dollar backdrop. That support faded ending the week as higher oil prices, stronger US yields and renewed hawkish Fed expectations hit EM FX more broadly. The peso’s carry appeal remains intact, but the setup is more fragile when volatility rises, as shown by the carry index losing momentum while FX volatility swings higher. Local data were mixed: Mexico’s bi-weekly CPI stayed benign at 3.10% y/y, core CPI slipped to 3.95% y/y, but activity softened, with IGAE at 1.11% y/y and -0.25% m/m. Technically, USD/MXN is back near 17.53, above the 20-day at 17.47, 50-day at 17.40 and 100-day at 17.47, but still below the 200-day at 17.69. A break above 17.54–17.60 would put the 200-day back in play, while a move below 17.48–17.40 would restore the peso’s short-term advantage. Next week gives the pair a cleaner macro test. The Fed meeting will set the tone for US yields and the dollar, while Mexico’s Q2 GDP on Thursday will decide whether local growth can still support the peso’s carry appeal.
BRL Still resilient. USD/BRL is trading near 5.08, holding up despite renewed US-Iran hostilities, higher oil prices, and a broader volatility shock across EM FX. Brent near $100 and WTI around $92 would normally trigger more pressure on high-beta currencies, but Brazil has a stronger offset: the terms-of-trade impulse is improving as energy and commodity prices rise, while elevated carry and steady demand for local assets continue to support the real. That combination has helped BRL absorb the geopolitical shock better than most EM peers, even as election risk and a stronger dollar remain the main threats. Technically, USD/BRL remains below the 20-day average at 5.12, the 50-day at 5.10, the 100-day at 5.10, and the 200-day at 5.22, keeping the broader bias tilted lower for the pair. Near-term support sits around 5.05–5.06, while a recovery above 5.10–5.13 would suggest the latest real strength is losing momentum. For now, Brazil’s terms-of-trade support, high carry and firm commodity linkages are outweighing the volatility spike, but the balance still depends on risk appetite holding up.
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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.
