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Nomura strategists see greater fiscal vulnerabilities in the United Kingdom (UK) than in the Euro area. Strong foreign inflows into Euro area bonds and comparatively better debt dynamics support its view that Euro (EUR) should outperform British Pound (GBP), US Dollar (USD) and Japanese Yen (JPY).

Euro area fiscal resilience supports EUR outlook

"For much of Europe, we see fewer downside risks from potential political uncertainty than in the past. In the past, the biggest risk/uncertainty factor associated with populist right-wing governments in Europe was the risk of a country leaving the euro area or the EU. However, the likes of RN in France and AfD in Germany, while still eurosceptic, no longer propose such extreme measures."

"Overall, we see GBP as facing the biggest risks in this regard in Europe. The Labour government in the UK under new PM Andy Burnham is trying balance improving growth without causing inflation, while maintaining fiscal credibility and delivering on spending commitments. With much higher debt-to-GDP than the euro area aggregate, which has risen at a faster rate, and with rising net interest payments in the years ahead, fiscal vulnerabilities seem unlikely to disappear any time soon."

"For the euro area as a whole, there is much less risk, in our view. For all of France’s concerns, these can be offset from a currency perspective by the much better positions of the likes of Germany and Spain, as noted earlier. For the Big 4, rising government interest payments may become more of a concern in the years ahead, but they should remain comfortably below the UK and US."

"Foreign inflows into euro area debt have surged in recent months, suggesting that overseas investors see the higher yields on offer as being more than enough reward for the relative risk being taken on. Indeed, we are currently looking for EUR to outperform both USD and JPY where fiscal dynamics look much more challenging."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The Indian Rupee is down against the US Dollar this week amid elevated Oil prices.
• Both the US and Iran don't seem to be making efforts to resume talks regarding the Hormuz reopening.
• The US plan to double down on its bond-buying program is proving to be a drag on the US Dollar.

The Indian Rupee (INR) ticks lower against the US Dollar (USD) on Friday. The USD/INR edges up to near 95.72 as elevated oil prices have outweighed a weak US Dollar.

At press time, the MCX Crude Oil contract expiring on September 21 trades 0.6% higher at around Rs. 8,350, closer to its over three-week high of Rs. 8,404 posted on Thursday.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.

As of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, is down 0.2% to near 99.63. The USD Index trades close to its three-month low of 98.56.

Oil prices remain elevated amid US-Iran deadlock

Global Oil prices remain at their higher levels as both the US and Iran seem least interested in resuming talks regarding the reopening of the Strait of Hormuz, a critical chokepoint for almost 20% of global energy supply.

On Wednesday, US President Donald Trump warned of measures to isolate Iran from the global financial system and severe economic consequences to nations if seen supporting the nation.

“ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences. Oil smuggling, swap lines, cash transfers, exchange houses, ship registries, front companies — it all needs to stop NOW. You know who you are,” US President Trump wrote on Truth Social.

According to TD Securities, "energy market tightness persists," with analysts warning that stalled diplomacy and mounting geopolitical frictions are keeping supply risks elevated. They note that "negotiations on hold for weeks and a shift toward economic pressure suggests crude flows in the market will remain critically tight, and Iranian aggression in the Oman lane will likely remain the norm," reinforcing concerns over constrained seaborne exports.

USD slides as Treasury buyback push caps yields but dents credibility

Brown Brothers Harriman’s Elias Haddad notes that the “USD is down against all major currencies” at the start of the session, with “global stocks and bonds… up.” He points out that longer-term US yields have eased, as “longer term Treasury yields edged a bit lower after yesterday’s rise with 30-year yields modestly below Wednesday’s buyback announcement levels.”

Haddad highlights the policy backdrop, recalling that “yesterday, Treasury Secretary Scott Bessent warned the buyback operation could be larger than the $4bn announced, while touting the ‘big toolkit’ at his disposal to tame the Treasury market.” At the same time, Bessent “attempted to ease concerns over US fiscal policy noting the White House would announce at the end of this week or early next week ‘an increased focus on fiscal consolidation.’”

However, BBH cautions that the fiscal narrative remains unconvincing. “The Congressional Budget Office (CBO) offers little evidence of fiscal consolidation, projecting historically large budget deficits and debt rising to a record 120% of GDP by 2036.” In their view, “without credible spending cuts or revenue increases, the White House plan risks being little more than putting lipstick on a pig.”

“Regardless, the boost to the Treasury’s buyback operation and the threat of more measures should help cap long-end Treasury yields,” Haddad argues. “But the relief comes with a credibility cost that translates to a weaker USD.” BBH warns that “the Treasury’s intervention blurs the lines between improving market functioning and suppressing borrowing costs to contain fiscal stress,” leaving the Dollar vulnerable even as the authorities seek to stabilize the long end of the curve.

India’s flash Composite PMI rises at a faster pace

India’s preliminary HSBC Composite Purchasing Managers’ Index (PMI) data for August has come in higher than expected. The Composite PMI arrives at 54.6, higher than estimates of 54.4 and the July reading of 54.3.

A stronger-than-projected increase in service sector activity helped the overall business expand at a faster pace. The Services PMI expanded to 54.5 from 53.3 in July.

The manufacturing sector activity also expanded but at a moderate pace. The Manufacturing PMI came in lower at 52.9 than the prior release of 53.5. It was expected to rise at a faster pace to 54.0.

Technical Analysis: USD/INR stays above 20-day EMA

In the daily chart, USD/INR has remained in a range between 95.49 and 95.87 for the past few trading days. The pair holds a mildly bullish near-term bias as price remains above the 20-period exponential moving average (EMA) at 95.57, suggesting underlying demand on dips.

The Relative Strength Index (RSI) at 55 sits just above its midpoint, hinting at modest upward momentum without stretching into overbought territory.

On the downside, immediate support is located at the 20-day EMA around 95.57, where buyers are likely to defend the recent advance. With no clear technical resistance levels provided in the current dataset, upside progress would depend on whether bulls can sustain closes above the short-term average and drive the RSI further into positive territory.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• AUD/USD hits session highs above 0.7150, approaching three-month highs in the 0.7200 area.
• Australia's Flash PMI figures show mild activity growth, but failed to boost the Aussie.
• The US Dollar remains on the defensive, hurt by US Treasury's bond buyback plans.

The Australian Dollar (AUD) accelerated its rally against the US Dollar (USD) on Friday, hitting session highs above 0.7150 for the first time since early June and drawing closer to a three-month top, in the 0.7200 area. Australia’s business activity figures highlighted a steady growth in July, although the main driver for the pair remains the US Dollar’s weakness following the US Treasury’s announcement of a plan to double bond buybacks from September on.

Preliminary  Purchasing Managers Index (PMI) Data released by S&P Global earlier on the day revealed that Australia’s manufacturing sector remained growing at a steady 52.0 rate in July, while services activity slowed down to 52.9 from 53.6 in June.  The Composite PMI ticked down to 52.5 from 53.2 in the previous month.

Dollar softens as markets eye US Treasury moves

The US Dollar, on the contrary, keeps bleeding, weighed by the US Treasury's plan to boost repurchases of long-term securities. Analysts at MUFG observe that, with investors focused on "potential further action by the US Treasury to stem the decline in UST bond yields," US Treasury Secretary Scott Bessent's pledges to "increased focus on fiscal consolidation" will likely be taken with scepticism by the market.

Against this background, MUFG experts hold doubts that any forthcoming measures will materially alter the fiscal trajectory or provide lasting support for the Dollar.

On the macroeconomic front, US preliminary S&P Global Purchasing Managers' Index (PMI) figures are expected to show a moderate slowdown of business activity, but at levels consistent with healthy growth. The Services PMI is seen easing to 54.0 from 54.6 in June, while Manufacturing activity is expected to have remained at 53.9, unchanged from the previous month.

• The Euro posts a fresh three-month high at 1.1710 against the US Dollar.
• The US Treasury plan to pace up its long-maturing bond-buying operations and receded hawkish Fed bets have weighed on the US Dollar.
• The ECB is widely expected to raise interest rates at the September meeting.

The Euro (EUR) trades 0.21% higher at around 1.1710 against the US Dollar (USD) during the European trading session on Friday, the highest level seen in over three months. The major currency pair climbs higher as the US Dollar (USD) underperforms due to multiple headwinds, notably United States (US) Treasury Department’s decision to double down on its bond-buying operations and receded hawkish Federal Reserve (Fed) bets.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is down 0.17% to near 98.67. The USD Index attracts slight bids after revisiting the fresh three-month low at 98.56 posted the previous day.

Euro support builds as ING flags benign Dollar decline

Analysts at ING observe that EUR/USD "remains well supported," with the pair benefiting from what they describe as a "benign decline in the Dollar that tends to float all boats." They add that, while "not that anyone is expecting it," any move toward "true US fiscal consolidation" would matter for the currency outlook, as "the combination of tighter fiscal policy and looser monetary policy would be Dollar-negative."

Dollar seen vulnerable as Fed faces pressure to cut rates in 2027

Analysts at Commerzbank argue that the Dollar is likely to come under renewed pressure once the war with Iran ends, as they do not expect the Fed to deliver the rate hikes currently priced by markets. Instead, they foresee the Fed "embark on pronounced and ultimately excessive interest rate cuts again in 2027, also because of the political pressure." Commerzbank adds that the Dollar is "vulnerable because it is significantly overvalued based on purchasing power parity," reinforcing their view that the currency will face downside risks over the medium term.

While comments from financial markets suggest that hopes of a prolong Fed’s wait mode to keep the US Dollar under pressure, firm expectations that the European Central Bank (ECB) will raise interest rates in September is strengthening the Euro.

Analysts at DBS highlight that EUR has been the “prime beneficiary of USD weakness,” with EUR/USD having “rallied towards 1.17” as the Dollar remains under pressure. They note that the latest inflation data have reinforced the Euro’s appeal, with the Eurozone’s July CPI “coming in line with expectations,” as both “headline and core inflation matched consensus of 2.9% y/y and 2.5% y/y respectively.”

DBS argues that this inflation backdrop “has entrenched expectations of an ECB rate hike for Sep,” pointing out that “markets [are] pricing in a 26bps hike with over 90% probability.” By contrast, they see the policy outlook across the Atlantic as opaquer: “on the other hand, the Fed’s next rate move is less clear given recent economic data softness, and upcoming mid-term elections in November,” leaving the Dollar on a weaker footing against the Euro.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1703, extending its advance well above the 20-period Exponential Moving Average (EMA) at 1.1561 and reinforcing a bullish near-term bias as price holds above this dynamic support. The Relative Strength Index (14) at 74.8 pushes deeper into overbought territory, suggesting that while buyers remain in control, upside momentum could be prone to pauses or brief corrective pullbacks.

On the downside, immediate support emerges at the recent pivot around 1.1703, followed by the 20-period EMA near 1.1561, which should act as a structural floor on a deeper retracement. Looking up, EUR/USD could extend its upside towards the May high near 1.1800.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Brown Brothers Harriman’s (BBH) Elias Haddad notes the US Dollar (USD) is weaker against all major currencies as longer-term US Treasury yields edge lower following buyback plans. Haddad argues expanded buybacks and fiscal messaging may cap long-end yields but at a credibility cost for the USD. Upcoming US August PMI will test whether the US growth advantage can still offer the Dollar near-term support.

Treasury actions pressure the Dollar

"USD is down against all major currencies, global stocks and bonds are up, while the rally in crude oil prices stalled. Longer term Treasury yields edged a bit lower after yesterday’s rise with 30-year yields modestly below Wednesday’s buyback announcement levels."

"Yesterday, Treasury Secretary Scott Bessent warned the buyback operation could be larger than the $4bn announced, while touting the “big toolkit” at his disposal to tame the Treasury market. Bessent also attempted to ease concerns over US fiscal policy noting the White House would announce at the end of this week or early next week “an increased focus on fiscal consolidation.”"

"The Congressional Budget Office (CBO) offers little evidence of fiscal consolidation, projecting historically large budget deficits and debt rising to a record 120% of GDP by 2036. Without credible spending cuts or revenue increases, the White House plan risks being little more than putting lipstick on a pig. "

"Regardless, the boost to the Treasury’s buyback operation and the threat of more measures should help cap long-end Treasury yields. But the relief comes with a credibility cost that translates to a weaker USD. The Treasury’s intervention blurs the lines between improving market functioning and suppressing borrowing costs to contain fiscal stress."

"The US August PMI will test whether the US growth advantage relative to other major economies remains intact (2:45pm London, 9:45am New York). If so, the data can offer USD some near-term support, while signs the US growth edge is narrowing would deepen its losses."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Gold heads for a third straight weekly gain, reaching its highest level since mid-May.
• A softer US Dollar and reduced expectations of an imminent Fed rate hike support the precious metal.
• XAU/USD rises above major daily moving averages, with $4,600 acting as the immediate resistance.

Gold (XAU/USD) is heading for a third consecutive weekly gain on Friday, extending an impressive rally that has lifted the precious metal by around 13% so far this month. At the time of writing, XAU/USD trades near $4,590 after briefly climbing above $4,600, its highest level since May 15.

The rally is driven by a combination of factors that have heightened macroeconomic uncertainty and encouraged traders to seek exposure to Gold. The biggest trigger this week was the US Treasury’s surprise decision to double its liquidity-support buybacks for longer-dated government securities to at least $4 billion per operation.

Long-term US Treasury yields initially fell sharply after the announcement but have since recovered most of their losses. However, the rebound has done little to stop Gold’s advance. Concerns about rising US government debt, large budget deficits and persistent inflation are eroding investor confidence in US assets, with the US Dollar (USD) paying the price.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 98.65, near three-month lows.

Uncertainty surrounding the Federal Reserve (Fed) is also adding to the nervous mood. Under Chairman Kevin Warsh, the central bank has placed less emphasis on forward guidance, leaving markets with fewer clear signals about the direction of interest rates. However, recent US employment and inflation data have reduced expectations of a rate hike at the upcoming meeting, providing the spark for Gold’s rally earlier this month.

Meanwhile, continued central-bank purchases, particularly from China, and stronger inflows into Gold exchange-traded funds (ETFs) keep underlying demand firm.

Still, Gold faces some hurdles. Treasury yields remain elevated, increasing the opportunity cost of holding the non-yielding metal. Energy-driven inflation is another concern, as higher Oil prices linked to the US-Iran stalemate could keep inflation above the Fed’s 2% target for longer and maintain pressure on the central bank to raise interest rates.

Technical Analysis: Bulls stay dominant as RSI nears overbought levels

XAU/USD holds a clear bullish bias as it extends above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which collectively underpin the recent uptrend. The Relative Strength Index (RSI) on the daily chart is near 70 and flags overbought conditions, while the Average Directional Index (ADX) is around 32, suggesting a moderate trend, and the Moving Average Convergence Divergence (MACD) indicator remains constructive, hinting that upside momentum is strong but getting stretched.

On the topside, immediate resistance emerges at the nearby horizontal level around $4,600, ahead of a higher barrier at $4,750. On the downside, initial support is seen at the 200-day SMA at $4,514, followed by the 100-day SMA at $4,379 and the 50-day SMA at $4,172, before a more distant structural floor at $4,000.

While the trend favors further gains, the overbought RSI warns that any failure to clear $4,600 could trigger a corrective pullback toward these underlying demand zones.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

The US Dollar Index (DXY) is broadly consolidating near the 99.00 level as investors process the US Treasury's expanded long-end bond buyback and a modest rebound in Treasury yields. While the buybacks initially cooled long-term borrowing costs, institutional strategists are divided on whether the policy move represents a fundamental pivot toward a softer Greenback or merely a temporary fix that leaves the US Dollar susceptible to renewed upside if inflation expectations re-ignite.

Treasury buybacks favor pro-risk FX, not the Dollar

Analysts at ING argue that the Treasury's buyback adjustments should be viewed as a proactive effort to protect the long end of the yield curve rather than a loss of policy credibility. If long-term yields remain contained, this creates a pro-risk environment characterized by a gradual US Dollar depreciation. Under this setup, high-beta commodity and emerging market currencies stand to outperform, provided equity and bond markets avoid a broader sell-off.

We see this week's developments less as a policy credibility story and more as a soft dollar, pro-risk story if the US Treasury is taking a greater interest in protecting the long end (...) That probably means a gentler dollar decline and some outperformance of high-beta commodity currencies and emerging market currencies in general.

Buyback impact leaves USD vulnerable to inflation shocks

Analysts at DBS Group Research maintain a more cautious perspective, observing that DXY has firmed alongside a modest rebound in long-end yields. Because the US Congress ultimately controls the fiscal budget, administrative buybacks alone cannot alter the broader deficit path. Furthermore, external risks, such as impending US sanctions on Iran, could push energy prices higher and reignite inflation fears, ultimately boosting yields and Greenback demand.

Without any meaningful change to the US fiscal trajectory (given that the US budget is set by Congress and not the Treasury), tweaks around buybacks can only have a small, transient impact on markets

How long will the Treasury buyback effect last?

The banks project that DXY will remain tightly bounded around the 99.00 handle in the immediate term. ING anticipates that official concern over long-end yields will keep the US Dollar capped below 99.00 and foster a favorable backdrop for risk-sensitive currencies. On the other hand, DBS Group Research highlights that without structural fiscal reform, potential inflation shocks from Middle East geopolitical sanctions could easily reignite US yield momentum and push the Greenback higher.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The New Zealand Dollar extends its advance for a third consecutive day and reaches its highest level since early June.
• Fading expectations of an immediate US rate hike weigh on the US Dollar, while prospects of monetary tightening in New Zealand support the Kiwi.
• Investors now await US PMI data, while tensions with Iran keep inflation risks and potential safe-haven demand in focus.

NZD/USD extends its advance on Friday and trades around 0.5980 at the time of writing, up 0.62% on the day. The pair reached its highest level since early June and is heading for a solid weekly performance, mainly supported by persistent weakness in the US Dollar (USD).

The US Dollar Index (DXY), which measures the Greenback's performance against a basket of six major currencies, loses 0.23% to 98.65 on Friday at the time of press. The US Dollar remains under pressure as investors scale back expectations of an immediate interest rate hike by the Federal Reserve (Fed).

The Minutes of the latest Federal Open Market Committee (FOMC) meeting nevertheless maintained a relatively hawkish tone. Policymakers indicated that further tightening could become necessary if progress on inflation remains insufficient. Markets therefore continue to consider a possible rate hike before the end of the year, particularly amid inflation risks stemming from higher Oil prices.

Meanwhile, the New Zealand Dollar (NZD) benefits from expectations of another interest rate hike by the Reserve Bank of New Zealand (RBNZ). The divergence between fading bets on immediate action from the Fed and prospects of monetary tightening in New Zealand therefore provides a supportive backdrop for NZD/USD.

New Zealand trade data released on Friday failed to derail this momentum. New Zealand records a monthly trade deficit of NZ$1,949M in July, but investors remain more focused on the monetary policy outlook and US Dollar dynamics.

Geopolitical risks could, however, limit the Greenback's decline. Tensions between the United States (US) and Iran over the Strait of Hormuz remain elevated, while higher energy prices fuel concerns about inflation. US President Donald Trump has notably threatened severe new sanctions against Iran and countries helping Tehran circumvent US restrictions. A further deterioration in the situation could revive demand for the safe-haven US Dollar.

Attention now turns to the preliminary S&P Global US Purchasing Managers Indices (PMIs) for August. Consensus forecasts point to a modest slowdown, with the Manufacturing PMI expected at 53.8, compared with 53.9 in July, and the Services PMI at 54, down from 54.6 previously. Weaker-than-expected figures could increase pressure on the US Dollar and continue to support NZD/USD, while an upside surprise could offer some relief to the Greenback.

Record short NZD bets clash with strong performance and El Nino tailwinds

Analysts at MUFG highlight that the weekly IMM positioning data, “tracked by many without necessarily throwing out a strong message,” is sending a clear signal for the New Zealand Dollar. The latest report, to the week ending 11 August, shows Leveraged Funds’ total short position in NZD has “hit a record in the series of the data going back to 2006,” a notable contrast to spot performance.

MUFG points out that “on a year-to-date basis NZD is actually the third best performing G10 currency after NOK and AUD.” The RBNZ policy rate “currently stand at 2.50% but the OIS curve implies expectations of nearly 100bps of tightening over the next 12mths,” yet in real terms policy remains accommodative. They note that “the actual inflation rate stands at 4.1% (Q/Q) although the monthly data shows slightly lower at 3.6%. Still, the real policy rate is more negative than across most of the rest of G10 and that could be encouraging this speculative selling.”

Against this backdrop, MUFG cautions that “while 100bps of tightening may prove excessive, the scale of short NZD positioning looks more extreme and we would argue at this level, the bar is relatively high for a notable leg lower for NZD.”

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5979, maintaining a bullish near-term tone as it holds above the 100-period and 200-period simple moving averages (SMAs) at 0.5917 and 0.5894 respectively. The pair is also trading over nearby horizontal support at 0.5960, while the Relative Strength Index (RSI) at around 72 sits in overbought territory, hinting that the latest advance could be losing some steam even as the broader uptrend remains supported.

On the downside, initial support is seen at 0.5960, followed by additional floors at 0.5940 and 0.5925, with the 100-period SMA at 0.5917 and the 200-period SMA at 0.5894 reinforcing the underlying bullish structure. On the topside, immediate resistance is located at the horizontal barrier near 0.5995, and a sustained break above this level would open the door for further gains, while failure to clear it might trigger a corrective pullback toward the cited support cluster.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Gold resumes its uptrend on Friday to test three-month highs in the $4,600 area
• Investors' concerns about the US plan to boost bond buybacks are hammering the US Dollar.
• XAU/USD bulls have gained confidence after breaching the jey 200-day SMA.

Gold (XAU/USD) extends gains on Friday, with bulls aiming for a retest of the $4,600 resistance area, the top of the last six months' trading range. Precious metals are gaining momentum, favoured by a sharp US Dollar selloff, following the announcement of a US Treasury plan to boost liquidity to repurchase long-term securities.

Rabobank analysts observe that “normally, lower Treasury yields weaken the currency through the interest-rate channel,” but this episode appears different. “This time, gold and crypto also rallied, suggesting concern about fiscal credibility and the perceived management of borrowing costs,” says the bank. Against that backdrop, the experts wonder whether “the end-result will be unchanged long-term yields, but a weaker dollar,” underscoring a potential shift in how markets are pricing US risks.

Technical Analysis: Bullish momentum improves above the 200-day SMA

XAU/USD trades at $4,582, retaining a bullish near-term bias although the Relative Strength Index (RSI) is reaching overbought levels in most timeframes. The precious metal has breached the 200-day Simple Moving Average (SMA), a very popular indicator among traders, but the daily chart shows RSI right at the 70 level, which hints at a stretched rally.

The Moving Average Convergence Divergence (MACD) remains positive, with the histogram printing wider green bars, which suggests that dips are likely to be bought.

Bulls are focused on the horizontal cap near $4,590 (May 29 highs). Above here, the $4700 psychological level and May's top at $4.4773 emerge as the next targets, although a bit far away for today.

On the downside, the 200-day Simple Moving Average (SMA) at $4,514 defends the bullish structure. A bearish reaction below that level would expose the previous top, at $4,450, and the August 14 low, near $4,310.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

MUFG’s Derek Halpenny notes that the US Dollar has weakened as investors focus on potential US Treasury measures to stem the decline in Treasury yields, while Japanese inflation data supports expectations for a 25bp BoJ rate hike in September. He remains sceptical that the US will deliver credible fiscal consolidation and sees limited scope for further EUR/USD upside in the near term.

Dollar pressured by fiscal doubts

"The US dollar has weakened further today after stabilising yesterday with investors focused on potential further action by the US Treasury to stem the decline in UST bond yields."

"Yields are broadly unchanged today although JGB yields have jumped following the release of nationwide CPI data for July which revealed a rebound back toward the 2.0% level. The core-core CPI rate jumped to 1.9% with underlying inflation lifted by certain foods and dining out."

"The data backs up current market pricing, and our view, that the BoJ will hike rates by 25bps at the next policy meeting in September."

"The US now looks to be signalling it is heading in the opposite direction after Scott Bessent stated that the Treasury would announce today or early next week “an increased focus on fiscal consolidation”."

"Obviously, we, like many market participants, are very sceptical of the US announcing anything of any significance that would lead to credible fiscal consolidation."

“A US fiscal initiative that lacks credibility won’t help UST bonds or the dollar but the appetite to sell the dollar remains contained by Middle East risks. For Europe that is evident through the steady rise in natural gas prices.”

"It’s difficult to envisage in these circumstances much further upside for EUR/USD over the short-term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)