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Commerzbank FX analyst Antje Praefcke notes that July US inflation is expected to rise only 0.1% month-on-month, with headline and core rates slipping to 3.4% and 2.5% year-on-year. She argues the Federal Reserve is unlikely to hike in September, but markets may adjust rate expectations and Dollar direction depending on the data and ongoing Middle East developments.

US inflation and conflict-driven volatility

"These are expected to reflect the temporary easing of tensions in the Middle East conflict and lower gasoline prices in early July, and are therefore likely to have risen by only 0.1% month-over-month."

"The possibility of an interest rate hike as early as September is likely off the table, as the FOMC will probably want to wait for more data showing that inflation is trending downward before ultimately deciding against a hike altogether."

"Should the inflation data come in weaker than expected, the market is likely to scale back its expectations further, which in turn would weigh on the dollar."

"In the alternative scenario - which we consider less likely - the market could see its assessment further confirmed, raise its expectations for an interest rate hike again, and thereby also provide a boost to the dollar."

"All in all, the dollar could become a bit more turbulent and volatile again by midweek."

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

According to a senior Iranian source, there are no discussions about extending the ceasefire between Iran and the US, Reuters reported.

Additional remarks

From Iran’s perspective, there is no ceasefire start date, therefore nothing to extend.

US violated the interim pact 48 hours after it was reached and withdrew from it a few days later.

One of the issues that is being discussed is US returning to MoU, defining a time frame for implementing its commitments.

Market reaction

No immediate reaction is seen in the US Dollar (USD), following remarks from Iran. At press time, the US Dollar Index (DXY) trades flat at around 99.85

• The Indian Rupee recovers against the US Dollar due to likely RBI intervention.
• India's retail inflation rises to 4.45% YoY in July, almost matching expectations of 4.5%.
• Investors keenly await the US CPI data for July.

The Indian Rupee (INR) recovers early losses against the US Dollar (USD) on Wednesday due to likely Reserve Bank of India's (RBI) intervention in the market. At press time, USD/INR trades slightly lower to near 95.33.

While dollar sales from state-run banks - most likely ‌on behalf ⁠of the ⁠RBI - kept a lid on losses, caution heading into key United States (US) inflation print and worries over higher oil prices contained the room for gains, ​traders said, Reuters reported.

The Indian currency underperformed in the opening session as surging oil prices prompt risks of higher foreign outflows, which are still intact. As of writing, the MCX Crude Oil contract expiring on August 19 trades flat at around Rs. 7,950, but is close to its weekly high of Rs. 8,075 posted on Tuesday.

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.

Restricted energy supply continues to boost oil prices

A prolonged oil supply disruption due to the closure of the Strait of Hormuz, a critical chokepoint to almost one-fifth of global energy supply, amid tensions between the United States (US) and Iran continues to boost oil prices.

According to data from Kpler, shipping traffic through the Strait of Hormuz, a vital passage to almost 20% of global energy supply, was recorded at just six vessels on August 10, down from a recent 10-day average of about 11. This remains a massive decline from pre-war levels of 130 to 140 ships daily, Reuters reports.

Meanwhile, mediators from Pakistan have expressed optimism regarding progress in negotiations between the US and Iran. Pakistan’s Defence Minister, Khawaja Asif told reporters that “things are shaping up again in favor of a peace arrangement or a deal, according to Bloomberg.

India's retail inflation rises in July

India’s retail Consumer Price Index (CPI) data for July grew almost in line with estimates. On an annualized basis, retail inflation accelerated to 4.45%, remaining within the RBI's tolerance band of 2%-6%, from 4.35% in June. The data was expected to arrive at 4.5%. Signs of steady inflation growth are unlikely to force RBI officials to consider raising interest rates in the near term.

In the monetary policy announcement earlier this month, the RBI left its key policy rates unchanged and delivered a data-dependent approach. Indian central bank trimmed its inflation forecast for the current financial year to 5% from 5.1% projected in June.

US CPI data awaited

The major highlight for global financial markets will be the US inflation data, which will be published at 12:30 GMT. The inflation data is expected to have a significant influence on the Federal Reserve’s (Fed) monetary policy outlook. In the July policy meeting, remarks from Fed Chairman Kevin Warsh clearly showed that officials are heavily concerned about inflationary pressures remaining well above the central bank’s 2% target for a long period.

US inflation seen firming but not reaccelerating in July

Brown Brothers Harriman’s Elias Haddad expects the upcoming US July CPI report to show inflation "firm modestly but stop short of signaling a renewed acceleration in inflation." He notes that "headline CPI is expected to rise +0.1% m/m vs. -0.4% in June and ease to 3.4% y/y vs. 3.5% in June," while "core CPI is expected to rise +0.2% m/m vs. 0.0% in June and ease to 2.5% y/y vs. 2.6% in June." Haddad argues that such a profile would underscore a gradual disinflation trend rather than a renewed pickup in price pressures.

Technical Analysis: USD/INR faces pressure near 20-day EMA

USD/INR struggles to return above the 20-day exponential moving average (EMA) at 95.52, hinting at the strength of Indian Rupee bulls.

The Relative Strength Index (14) around 46 hints at soft, range-bound momentum rather than aggressive selling pressure.

On the topside, immediate resistance is located at the 20-day EMA near 95.52, which would need to be decisively reclaimed to ease the current downside bias and open the way for a further recovery move toward 96.00. Looking down, key support zones are the August 5 low at 94.83 and the June low at 94.15.

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

• Yen hesitates below 159.00 with all eyes on US inflation figures.
• US CPI data is expected to show easing inflationary pressures, which might cool hopes of immediate Fed tightening.
• A hawkishly leaning BoJ Summary of Opinions has provided some support to the Yen.

The Japanese Yen (JPY) is one of the best performers in an unusually low-volatility market on Wednesday, picking up to levels near 159.00 against the US Dollar, after hitting support in the 159.45 area. USD/JPY dips, however, are finding buyers, with the focus on the US Consumer Price Index (CPI) report, due later on the day.

The market consensus anticipates a moderate slowdown in July’s consumer prices, with the yearly CPI growth easing to a 3.4% rate from 3.5% in June. Likewise, the core CPI is seen slowing down to a 2.5% year-on-year reading from the 2.6% rate posted in the previous month.

US CPI data set to determine the path for USD crosses

Brown Brothers Harriman’s Elias Haddad notes that the US CPI reading is set to be “a key swing factor for Fed funds rate expectations and set the tone across rates, currencies, and broader risk sentiment.” He points out that Fed funds futures “currently price in 50% odds of a 25bps hike in September” and that “a soft US CPI would strengthen the case for a dovish repricing in Fed hike expectations and further undermine USD while lifting risk assets.”

By contrast, “a hot US CPI will likely deliver a knee-jerk USD bounce via higher front-end yields.” However, he cautions that “with Fed policy already restrictive (assuming a neutral rate of 3.00%), the scope for a material hawkish repricing looks limited, which is a USD headwind.”

The Yen, on the other hand, is drawing some support from the hawkishly leaning Bank of Japan's (BoJ) Summary of Opinions released earlier this week. The bank's monetary policy committee showed increasing concern about upside risks to inflation, opening the door to a quarter-point interest rate hike in September, with one committee member suggesting a possible acceleration in the bank's monetary tightening pace.

• India’s annual inflation rate accelerates to 4.45% in July, from 4.38% in June.
• The increase in consumer prices remains slightly below the 4.5% expected by markets.
• The Indian Rupee reacts modestly to the release, while USD/INR declines by 0.05%.

Inflation in India accelerates slightly in July, while remaining close to market expectations. The Consumer Price Index (CPI), released on Wednesday by the Ministry of Statistics and Programme Implementation (MoSPI), rises 4.45% YoY in July, compared with 4.38% in June. The market consensus had expected a slightly stronger increase of 4.5%.

Market reaction

In the foreign exchange market, the Indian Rupee (INR) reacts modestly to the release. USD/INR remains slightly tilted to the downside following the data, losing 0.05% on Tuesday and trading around 95.3350 at the time of writing.

• Australian Dollar gains against its peers even as financial markets seem unconvinced by the RBA’s hawkish tone.
• The RBA left its OCR unchanged at 4.35% on Tuesday, and kept the door open for more rate hikes.
• Investors await the US CPI data for July.

The Australian Dollar (AUD) is up against its major currency peers, trading marginally higher at around 0.7068 against the US Dollar (USD) during the European trading session.

The antipodean outperforms despite increasing doubts over the Reserve Bank of Australia’s (RBA) appetite for raising interest rates further this year. In the monetary policy announcement on Tuesday, the RBA left its Official Cash Rate (OCR) unchanged at 4.35% for the second time in a row, as expected, but kept the possibility of a fourth interest rate hike this year on the table, citing upside inflation risks.

“The board hopes to slow the economy, sees upside risks to inflation,” RBA Governor Michele Bullock said at the press conference, and added, “We will raise rates again if needed.”

According to analysts at Standard Chartered, the Reserve Bank of Australia is keeping a flexible stance on policy despite holding the cash rate steady. They note that at the press conference, Governor Bullock “talked up the uncertainty around the RBA’s central forecasts and did not rule out the need for more policy tightening in the immediate future if upside inflation risks materialize.”

Even so, Standard Chartered stresses that “our base case remains no more RBA rate hikes in the foreseeable future.” The bank cautions that “the risk to our view is skewed towards a hike in Q4 if demand does not slow sufficiently or if energy prices revisit recent highs, exacerbating both capacity and price pressures.” Ultimately, the analysts argue that “easing labor-market conditions, if sustained, should help contain underlying wage and price pressures in the economy,” supporting the case for rates to stay on hold.

Contrary to the RBA keeping the door open for further monetary policy tightening, strategists at Commerzbank expect an interest rate cut instead. In a note, analysts highlighted that the latest RBA communication “does not read particularly hawkish,” noting that the updated projections “revised the expected unemployment rate upward, while short-term inflation forecasts were revised downward.” They point out that “only in the medium term were inflation forecasts revised upward,” a shift that “likely explains the statement that further rate hikes are certainly conceivable and that inflation risks remain on the upside.”

All told, Commerzbank judges that “the decision and the forecasts seem to be in line with market expectations; the AUD is showing little movement in its initial reaction, at least.” However, in terms of the policy outlook, the bank reiterates that “in the medium term, we continue to expect that the RBA’s next move will be an interest rate cut, so the AUD is likely to remain under pressure in the coming months.”

Meanwhile, the US Dollar trades almost flat ahead of the United States (US) Consumer Price Index (CPI) data is scheduled to be published at 12:30 GMT.

US Dollar steadies as markets await pivotal July CPI print

Brown Brothers Harriman’s Elias Haddad notes that “markets are in a holding pattern ahead of today’s critical US July CPI report (1:30pm London, 8:30am New York),” with the release set to be “a key swing factor for Fed funds rate expectations and set the tone across rates, currencies, and broader risk sentiment.” He points out that Fed funds futures currently “price in 50% odds of a 25bps hike in September to a target range of 3.75-4.00%, down from a high of 75% end-July, and just over 40bps of cumulative tightening in the next twelve months.”

On the data itself, Haddad expects “US July CPI to firm modestly but stop short of signaling a renewed acceleration in inflation.” BBH forecasts headline CPI “to rise +0.1% m/m vs. -0.4% in June and ease to 3.4% y/y vs. 3.5% in June,” while core CPI is projected “to rise +0.2% m/m vs. 0.0% in June and ease to 2.5% y/y vs. 2.6% in June.”

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.7066, holding a bullish near-term bias as price extends higher within an upward parallel channel. The pair is trading above the 20-day exponential moving average (EMA) at 0.7021, which reinforces the constructive tone, while the channel’s upper boundary at 0.7079 acts as immediate overhead resistance. The Relative Strength Index (RSI) at 59.66 sits in positive territory but shy of overbought, suggesting persistent buying interest without signs of exhaustion yet.

On the downside, initial support is seen at the 20-day EMA around 0.7021, with a deeper floor at the lower edge of the channel near 0.6951 if a corrective pullback unfolds. On the topside, a clear break above the channel top at 0.7079 would open the way for a continuation of the advance, keeping the bullish bias intact as long as the pair holds above the 0.7021 support area.

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

Chris Turner at ING notes EUR/USD remains lacklustre despite better Eurozone data and upside surprises, as high European natural gas prices and Gulf tensions weigh on the Euro. He argues that a soft US CPI print could allow EUR/USD to challenge last week’s 1.1580 high, though further gains may be limited by upcoming data and the Jackson Hole symposium before the Fed’s mid-September decision.

Energy costs cap Euro upside

"EUR/USD continues to trade in a lacklustre fashion. Better hard activity data and eurozone economic numbers generally surprising on the upside have failed to provide the euro with much of a lift. That may be owed to unresolved tension in the Gulf, which is keeping European natural gas prices above €60/MWh."

"In terms of geopolitics, there is very little clarity here, although the latest reports suggest Pakistan and Oman are managing to bring the US and Iran a little closer together."

"If the US CPI number does indeed come in on the soft side, EUR/USD should be able to challenge last week's high at 1.1580. That is about the extent of a move priced into one-day straddle options."

"Much more of a move may be too much to ask in quiet summer markets, given we will also see another round of CPI and jobs data – plus the Jackson Hole Fed symposium – before the Fed decides on policy mid-September."

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

• WTI Oil reverses lower and falls 0.77% on Wednesday after approaching a nearly two-week high.
• The International Energy Agency forecasts global Oil supply to fall by 4.3 million barrels per day this year.
• A 9.1 million-barrel increase in US crude inventories weighs on prices despite escalating supply concerns.

West Texas Intermediate (WTI) US Oil reverses lower on Wednesday and trades around $81.60 at the time of writing, down 0.77% on the day. Oil prices erase part of their recent gains as a sharp increase in US crude inventories offsets mounting concerns about global supply, with the Strait of Hormuz remaining at the center of tensions between the United States (US) and Iran.

US President Donald Trump says the situation with Iran is “going fine” and claims that US forces are in “total control” of the Strait of Hormuz. However, Tehran maintains that the strategic waterway will remain closed until its conditions are met. Iran Supreme National Security Council Secretary Mohsen Rezaei says these demands include an end to the US war and blockade, the release of frozen Iranian assets and a regional ceasefire.

Tensions remain elevated after US forces disabled a Panama-flagged cargo ship attempting to sail toward an Iranian port. According to reports, US forces fired two Hellfire missiles at the vessel's steering gear after it ignored warnings, highlighting the persistent risk of further escalation around one of the world's most important energy shipping routes.

Diplomatic efforts nevertheless continue. Pakistani Interior Minister Mohsin Naqvi has traveled to Tehran for talks with Iranian officials as part of mediation efforts aimed at ending the conflict and reopening the Strait of Hormuz. Pakistan has also described the 14-point memorandum of understanding brokered with Qatar in June as a potential “template of peace,” even though the agreement unraveled only days after it was signed.

The prolonged disruption is increasingly affecting the global Oil market. The International Energy Agency (IEA) now forecasts global Oil supply to decline by 4.3 million barrels per day (bpd), or around 4%, this year to 102.02 million bpd. This represents a larger contraction than the 3.7 million bpd decline projected in July, reflecting supply losses from the Middle East and Russia and the continued absence of an agreement allowing unrestricted shipping through the Strait of Hormuz and the Bab al-Mandeb Strait.

The IEA also warns that global Oil inventories fell by 2.2 million bpd last month, pushing total stocks below 7.9 billion barrels for the first time since April 2025. The agency now expects the global Oil market to record a deficit of 1.8 million bpd in the third quarter, more than twice its July estimate. Rapidly declining inventories are increasing the urgency of reopening the Strait of Hormuz and reducing the buffer available to absorb further supply disruptions.

However, weakening demand provides a counterweight to these bullish supply dynamics. The IEA forecasts global Oil demand to decline by 1.6 million bpd this year, around 47% more than projected in July, as higher fuel prices and supply constraints weigh on consumption.

In the short term, US inventory data also pressures WTI prices. The American Petroleum Institute (API) reports that US weekly crude Oil inventories surged by 9.072 million barrels last week, compared with market expectations for a 0.5 million-barrel decline. The increase, the largest since February, helps explain Wednesday's reversal despite an increasingly tight global supply outlook.

Middle East risks linger as markets focus on more upbeat narratives

Analysts at Rabobank observe that “yesterday saw the regular schtick where the Middle East situation remains worrying, but markets reacted to more positive narratives.” They highlight a backdrop of escalating tensions, noting that “after four crew and two rescuers were killed in a Houthi Red Sea attack on a ship and the US struck another in the Gulf of Oman trying to break its Iran blockade; Iran said Hormuz will stay closed unless the US meets its over-reach conditions.” Against this, political rhetoric has intensified, with Rabobank pointing out that “Trump doubled down on economic warfare vs Tehran because he thinks it’s ‘bleeding badly’ – with the other option still being to ‘hit them really hard’.”

Yet, the bank underscores that Iran “is defying US pressure by becoming a ‘survival economy’,” as reported by the Wall Street Journal, while “Pakistan claimed a US-Iran deal is close, and US Energy Secretary Wright said far more oil is flowing through Hormuz than others estimate, suggesting the US doesn’t really need to act.” In Rabobank’s view, “this routine will likely continue through to the US midterms – and then we will see what happens,” implying that markets may have to navigate this uneasy balance between persistent geopolitical risk and a tendency to latch onto more constructive narratives for some time yet.

WTI US Oil technical analysis

In the one-hour chart, WTI US Oil trades at $81.71. The near-term bias remains bullish as price holds comfortably above the 100-period simple moving average (SMA) at $78.73 and the 200-period SMA at $78.76, reinforcing a supportive underlying trend. However, momentum has cooled, with the Relative Strength Index (RSI) easing to around 46, hinting that the recent strong rally is consolidating rather than extending aggressively for now.

On the downside, initial support aligns near $80.00, ahead of a broader structural floor defined by the clustered 200-period and 100-period SMAs around $78.76–$78.73, and then the horizontal level at $77.50. Below that, deeper demand is seen at $73.51. On the topside, immediate resistance emerges at $84.50, with a subsequent barrier at $86.62, where a break higher would reopen the path toward further gains in the recovery sequence.

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