- Hormuz hopes. Iran and Oman agreed on a proposed shipping route through the Strait of Hormuz, raising prospects for a partial reopening of the critical energy corridor and helping ease immediate oil supply concerns.
- Crude reality. Oil prices have fallen up to 12% this week but remain elevated enough to keep concerns over second-round inflation effects alive.
- PMI-powered. Improving global growth signals are giving policymakers cover to maintain a hawkish stance, hence markets are still pricing in rate hikes.
- Shock drop. US payrolls undershot estimates with a loss of 23,000 jobs in July, with June and May gains revised lower. This eased Fed tightening bets.
- Risk-on rally. Strong earnings and reduced tightening expectations support equities, with the S&P 500 hitting fresh records while the VIX sits near 2026 lows..
- Chip check. Renewed weakness in semiconductor stocks prompted investors to reassess AI-related valuations, though, following a sharp rebound last week.
- Rhine pressure. Record-low water levels on Germany’s river Rhine are disrupting one of Europe’s busiest trade arteries, highlighting growing climate-related supply-chain risks.
- Dollar dilemma. FX markets appear largely positioned for positive US-Iran headlines, limiting downside potential for the dollar. But a weak US jobs report followed by a softer inflation print next week could accelerate its depreciation.
Global Macro
Global growth pulse improves unevenly
US PMIs expand. ISM manufacturing rose to 55.6 vs 54.0 expected, the strongest since May 2022, while ISM services held in expansion at 54.1 vs 54.5 expected. The details were mixed: manufacturing employment improved, but services employment slipped back into contraction, while price gauges stayed elevated in both surveys.
Global PMIs rebound. Composite PMIs improved across most major economies in July, with the US, Australia, Japan and UK all above 50, while Germany moved back into expansion and Canada and France improved but remained sub-50. The chart supports a “better, but uneven” global activity message.
China lags. China’s private-sector composite PMI cooled from 53.6 to 50.8, showing that the rebound in global activity is not fully synchronized. The drop keeps China as the weak link in the global PMI mix, especially compared with improving readings across the US, Japan and Europe.
US weak jobs report. US payrolls delivered a clear downside surprise. Nonfarm employment fell by 23,000 in July, well below expectations for an 80,000 gain, while May and June were revised lower by a combined 103,000 jobs. The unemployment rate slipped to 4.1% from 4.2%, but that improvement came with another drop in labor force participation to 61.4%. That makes the headline jobless rate less reassuring than it looks.
Week ahead
US inflation test and RBA decision
US inflation takes centre stage. Wednesday’s July CPI release is the week’s centrepiece, with consensus looking for 0.2% m/m gains in both headline and core CPI after June’s -0.4% and flat readings. Annual headline inflation is expected to hold at 3.5%, while core eases to 2.5% from 2.6%. Thursday’s PPI, seen at 0.2% headline and 0.3% core, completes the pipeline read.
Also from the US this week, retail sales is expected at 0.3% MoM, while Michigan sentiment is forecast to ease to 54.0 from 55.2.
RBA decision to dominate in APAC. Australia’s cash rate call is due Tuesday with the target sitting at 4.35% and consensus looking for no change. Otherwise, China’s July CPI is expected to slow to 0.8% from 1.0%.
UK data dominates Thursday. Preliminary 2Q GDP is seen at 0.4% quarterly, down from 0.6%, though the annual rate should firm to 1.1% from 0.9%. June industrial and manufacturing production and the trade balance land alongside, with Norway’s rate decision at 9am and Eurozone industrial production at 10am.
Europe closes the week. We get German final July CPI on Wednesday and the French readings on Friday, ahead of the second Eurozone 2Q GDP estimate.
FX views
Calm after the storm
USD Dollar softens after payrolls. The US dollar is moving lower after the July jobs report delivered a clear downside surprise and pushed markets to pare back Fed hike expectations. Payrolls fell by 23,000 versus expectations for an 80,000 gain, while May and June were revised lower by a combined 103,000 jobs. Calmer Gulf headlines had already reduced haven demand, helped oil retreat from stress levels and supported risk sentiment, while the earlier US-Japan yen intervention left the dollar vulnerable through USD/JPY. Today’s report adds a cleaner macro reason for the dollar to stay offered, as the front-end rate cushion has weakened and markets now see less urgency for the Fed to tighten in September. The index focus is on the 200-day near 99.1, as a key next support if selling extends. That leaves the dollar in a weaker holding pattern: less supported by haven demand, still carrying the hangover from yen intervention, and now facing a softer labor-market signal that challenges the recent higher-for-longer trade. Looking forward, the focus shifts back to inflation, with July CPI on Wednesday and PPI on Thursday set to test whether the dollar can defend the 100 area or lose further ground.
EUR Markets react to Treasury’s euro move. EUR/USD consolidated above 1.1500, around six-week highs, after reports the US Treasury had used euros instead of US dollars in its intervention in Japanese yen markets. Japanese authorities had sold USD/JPY, as is more usual in these cases, causing the US dollar index to hit six-week lows and providing support to the euro. The euro was supported as the ECB Economic Bulletin suggested energy market volatility could push the ECB to hike when it meets next in September. Markets see an 85% chance of a hike, according to Bloomberg. For the week, the euro gained most versus the JPY as it recovered from the large intervention move that pushed EUR/JPY to nine-month lows. The EUR/CHF was also stronger as the pair hit year-to-date highs. The euro lagged versus the SEK and AUD. Technically, EUR/USD remains rangebound, with resistance seen at 1.1600 and support at 1.1350. Key upcoming data includes June-quarter employment and GDP on Friday.
GBP Cross currents. The week’s dominant drivers were external. Falling oil prices, down sharply on hopes of a US-Iran agreement, supported GBP against commodity-linked currencies such as the NOK, while improving global risk sentiment favoured higher-beta peers like the SEK and AUD, leaving sterling lagging. Against the euro, sterling remained on the defensive after July’s rally. GBP/EUR consolidated in the upper 1.16s after retreating from one-year highs above 1.18, as narrowing UK-eurozone yield differentials reduced support from the rates channel. Meanwhile, GBP/USD is flat on the week despite a softer dollar backdrop. The pair remains trapped within the broad 1.32-1.35 range that has defined much of 2026. The persistence of that range is reflected in options markets, where implied volatility continues to trade below its long-term average in what is now the second-longest such stretch in a decade. With August historically proving a difficult month for sterling and domestic fundamentals struggling to gain traction in FX markets, the pound is increasingly beholden to external drivers such as the dollar, risk sentiment and energy prices.
CHF Francly funding. The Swiss franc remained under pressure this week as its credentials as the market’s preferred funding currency continued to strengthen. Japan’s increasing efforts to support the yen, backed by a larger intervention footprint, are making investors think twice about using JPY-funded carry trades. That leaves CHF as the obvious alternative. The volatility backdrop reinforces the trend. While USD/JPY volatility has risen sharply amid intervention risks, CHF volatility is close to long-run norms. For carry traders, funding stability is crucial, and the risk of a sudden multi-percent yen rally makes the franc a more attractive funding vehicle. Meanwhile, the SNB remains among the most dovish G10 central bank, reinforcing the franc’s growing role as the market’s preferred funding currency and a structural headwind for CHF performance. EUR/CHF is nestled close to its year-to-date highs, and around the 100-week moving average, highlighting the franc’s broader underperformance. USD/CHF is broadly flat after suffering its worst weekly decline since April, yet the pair remains around 2% higher year-to-date and continues to trade above its key long-term daily moving averages.
CAD Loonie lags. USD/CAD has slipped toward 1.395 after the July jobs reports delivered a clear relative boost for the Loonie. Canada added 75,000 jobs, well above expectations for a 20,000 gain, while the unemployment rate fell to 6.4% and wages cooled to 2.8% y/y. The US report moved the other way, with payrolls falling by 23,000, May-June revisions subtracting another 103,000 jobs, and participation slipping to 61.4%. That relative labour-market swing has helped pull USD/CAD down from the 1.40 area, as US yields fall and markets pare back September Fed hike expectations.. Technically, USD/CAD is now below the 100-day near 1.391 and the 200-day near 1.385 coming back into focus. A sustained break below 1.3910 would open the door to 1.3850, while a rebound above 1.4000 would suggest the Loonie’s post-jobs rally is losing momentum. With Canada’s calendar light next week, the next test comes from US inflation, as July CPI and PPI will decide whether lower US yields keep dragging USD/CAD lower or give the dollar a chance to stabilize.
AUD Aussie resilience meets Fed reality. The Aussie was higher in most markets over the last week as AUD/USD reached six-week highs. Australia’s services sector main activity gauge climbed to 53.6 from 50.5 and new orders rose for the first time since February. Firms hired more staff and worked through a bigger backlog, even as overseas demand softened. Property, business services and telecoms led the way; transport lagged. Confidence hit its highest since the Middle East conflict began, though costs and customer prices both rose faster. Improving domestic data helps the Aussie, but a Fed that looks ready to raise rates in September should keep a lid on gains. AUD/USD sits roughly 3.5% below its 6 May peak of 0.7278. First support sits at the 50-day EMA at 0.7010, then the 21-day EMA at 0.7003. Resistance is at 0.7100.
CNH China’s slowdown tests yuan strength. China’s services engine lost its footing in July. The private services gauge dropped to 50.4 from 54.1, short of the 53.7 expected, while the official non-manufacturing reading slipped to 49. The business activity index was the weakest since September 2024, with new business growing at its slowest since March as demand at home cooled. Confidence in the year ahead was the lowest since February 2020, and the composite measure eased to 50.8 from 53.6. Higher oil prices and renewed Gulf shipping disruptions add pressure to Chinese service firms already grappling with weak demand and thin order books. USD/CNH is still near a three-year low. A break above the 21-day EMA at 6.7635 opens the way to the 50-day EMA at 6.7789, with support at 6.7400.
JPY USD/JPY recovers post-intervention. The Japanese yen dominated headlines over the last week as markets continued to react to the US-Japanese joint intervention. The JPY spent the week mostly giving back these intervention-led gains with the yen’s biggest losses versus the Aussie, CAD and GBP. On the date front, Japanese households kept their wallets shut for a seventh straight month. Real spending fell 3.3% from a year earlier against forecasts for a 1.0% rise, and 6.4% on the month against a 3.1% drop. Real wages rose 1.6% for a sixth month, so better pay is still not reaching the tills. With consumption over half the economy, the Bank of Japan’s next move gets harder to justify. Markets are pricing in a 98% likelihood of a BoJ hike in October. Higher oil prices add another headwind for an energy-importing Japan. USD/JPY is at one-week high. The pair is down about 3.4% from its 23 July high of 163.99. First resistance is the 100-day EMA at 159.84, then the 21-day EMA at 160.45.
MXN Peso strengthens. USD/MXN is trading near 17.1, with the peso at its strongest level since May after Banxico held rates at 6.50% for a second straight meeting and signaled that the current policy stance is likely to remain in place. The unanimous hold matched expectations, but the updated inflation path was less dovish than the headline decision: Banxico now expects headline and core inflation to return to 3% in Q4 2027, later than the previous Q2 2027 forecast, while risks remain tilted to the upside from sticky services, US policy uncertainty and Middle East tensions. That keeps Mexico’s carry bid alive, especially with the policy rate still high and rate-cut expectations fading, even as the real policy rate has slipped toward the lower end of Banxico’s neutral range. Technically, USD/MXN is now below the 20-day average at 17.38, 50-day at 17.40, 100-day at 17.43 and 200-day at 17.62, leaving the broader trend tilted lower. The next downside area is 17.15–17.00, while a recovery above 17.38–17.43 would be needed to challenge the peso’s short-term momentum. For now, MXN still has the better mix of carry, growth resilience and export support, but next week’s focus will shift to whether US CPI/PPI can keep pressure off the dollar.
COP Policy surprise. USD/COP is trading near 3,150, with the Colombian peso still rallying after BanRep surprised markets by holding rates at 12.0% instead of delivering the 50bp hike many had expected. The decision was not dovish, though: the vote was narrow, with three directors backing a 50bp hike, and BanRep also announced a program to accumulate up to USD4bn in reserves, a signal that policymakers are watching the speed of peso appreciation closely. The COP is up about 1.4% post-Fed, second only to CLP, while DXY is down 1.4%, so the peso is still benefiting from broad dollar weakness and LatAm carry demand. The spot sits below the 20-day average near 3,215, 50-day near 3,385, 100-day near 3,530 and 200-day near 3,645. BanRep’s own July report still flags rising inflation, strong domestic demand and high inflation expectations, so the hold looks more like caution ahead of the government transition than a green light for easier policy. Near-term support sits around 3,100–3,120, while a rebound above 3,215 would be the first sign that the sharp peso rally is starting to correct.
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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.
