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• WTI trades near $85.00, up 2.5%, still inside the August range.
• Two launchers hit, no production lost, no barrel confirmed missing.
• Hormuz transits down to about five a day over the weekend.

Crude Oil trades near $85.00 and 2.5% higher on the session on Monday, after American forces struck two Iranian rocket launchers on Larak Island and Tehran answered with missile and drone attacks on two air bases in Jordan. West Texas Intermediate (WTI) opened near $84.00, ran to a session high just short of $86.00, and has held most of that ground. Nothing that happened over the weekend removed a barrel from the market.

What two launchers actually threatened

The military content of Sunday's strike rounds to nothing. Two mobile launchers on a small island do not change the balance of anything, and Central Command described the action as limited and precise, which is the language of a traffic stop rather than a campaign. What the launchers were carrying is the entire story.

Sea mines are the only cheap instrument capable of closing the Strait of Hormuz, and Central Command had cleared the last batch out of the international shipping lanes the week before. Iran was reloading. The barrel is repricing the odds that a waterway just declared clear gets mined again, which is a transit risk rather than a production loss, and the two behave very differently in a curve.

Shipping data agrees that transit is where the damage sits. Visible commodity vessels crossing the strait fell to roughly five a day over the weekend, and British maritime authorities reported a tanker struck by a projectile on an inbound run on Saturday. About a fifth of the world's Crude Oil moved through that water before the war began at the end of February.

The supply shock nobody can locate

The loudest supply claim of the weekend arrived with no evidence attached. President Trump posted that Kharg Island, the terminal handling almost all Iranian Crude Oil exports, was being destroyed, and the post carried an artificially generated clip and no further detail. No independent confirmation that the island was under attack has surfaced since.

The flow numbers have meanwhile been improving rather than collapsing. Bank estimates put Gulf exports at roughly 15 million to 16 million barrels a day, well up from the 5 million to 6 million trough in March and still short of a prewar 22 million to 24 million. A market genuinely discounting a fresh catastrophe would not be sitting two thirds of the way back to normal.

The tape sides with the flow numbers rather than the headline. A 2.5% session that stops short of the late-August peak, inside a band the barrel has not escaped since the first week of the month, is a risk premium being topped up rather than a supply loss being discounted.

The mechanism that actually removes barrels this quarter is administrative rather than kinetic. The Treasury sanctioned close to 60 entities, individuals and vessels on Monday, and the secretary has signalled a fresh secondary package roughly every week from here. Sanctions take longer to bite than a missile and they do not photograph well, which is why the tape keeps paying for the strike and discounting the paperwork.

The week the barrel writes its own ceiling

Pricing for a September Federal Reserve increase sits near 60% after Friday's Jackson Hole keynote, against roughly 35% before it, and a barrel through $85.00 is among the reasons it stays there. The Institute for Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) lands Tuesday at 14:00 GMT with prices paid forecast at 72 against 71.1 prior, and the services equivalent follows Thursday with that line last at 70.3.

Those two subindices are where an energy shock registers before it reaches any inflation release, which makes this week a feedback loop rather than a calendar. Energy lifts prices paid, prices paid lifts hike odds, hike odds lift the Dollar, and a firmer Dollar caps the barrel that started the sequence.

Friday's employment report is the week's last event, with August payrolls forecast at 58K after a 23K contraction and hourly earnings accelerating to 0.3% MoM from 0.1%. The private payroll count lands Wednesday at 12:15 GMT at a forecast 47K, and the Beige Book follows at 18:00 GMT the same day. None of it changes the supply picture, and all of it changes the rate that supply picture is discounted against.

Levels to watch

Resistance: The session high just short of $86.00 is the first line, with the late-August peak near $86.50 above it. Beyond there the August ceiling near $87.00 has turned back every attempt this month, and the July spike high just above $92.00 is the only reference left in the window.

Support: The session floor sits in the $83.50 area, with the 50-day Exponential Moving Average (EMA) near $82.00 the next line beneath it. Below there the 200-day EMA near $78.50 has not been tested since the first week of August, and the base near $74.00 anchors the month.

Bias: Bullish while the $83.50 area holds, with targets at $86.00 and then $86.50. The daily Stochastic Relative Strength Index (Stoch RSI) near 75 is climbing toward the overbought band with room still above it, and the sequence of higher lows since early August remains intact. Invalidation on a daily close beneath $82.00.

WTI daily chart

• GBP/USD rises modestly as the US Dollar softens before US data.
• Iran tensions lift Oil, keeping inflation and Fed risks alive.
• US jobs data and BoE hearings drive next catalysts.

The Pound Sterling (GBP) advances during the North American session on Monday, up a modest 0.09%, as the US Dollar (USD) edges lower despite last Friday’s hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh, ahead of a packed week of economic data from the United States (US). At the time of writing, the GBP/USD pair trades at 1.3549.

GBP/USD steadies as traders weigh Warsh, Oil risks and upcoming data

Sentiment shifted sour as tensions between the US and Iran rose, driving energy prices higher. West Texas Intermediate (WTI), the US crude Oil benchmark, hit $85.56 per barrel, up some 2.50% after reaching a high of $86.79.

Attacks between the two countries decreased the likelihood of free navigation through the Strait of Hormuz, while Iran attacked US assets in Jordan and the UAE. Consequently, US President Donald Trump said retaliation is coming, according to Fox News.

On Friday, Fed Chair Kevin Warsh recognized that inflation remains above the central bank’s target and is a priority, while assuring that the jobs market is solid.

After his speech, money markets had priced in a 64% chance of a rate increase for the September 16 meeting. Meanwhile, traders eye the release of Nonfarm Payrolls figures on Friday, followed by inflation data a week before the Federal Reserve’s next meeting.

On Tuesday, the US economic docket will release figures on manufacturing activity, namely the ISM Manufacturing PMI for August, which is expected to show a deceleration from 55.6 to 55.2. Also, traders will eye the release of JOLTS Job Openings for July, which are expected to show the strength of the labor market.

In the UK, domestic developments regarding new PM Andy Burnham's Autumn Budget, along with US Dollar dynamics, will provide direction for GBP/USD. Also, market participants would be keen to digest the Bank of England (BoE) Monetary Policy Hearings ahead of BoE Governor Andrew Bailey's speech on Thursday.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3550, keeping a bullish near-term bias as the pair holds above the cluster of reclaimed structural levels and the triple simple moving average (50, 100, 200) around 1.3429. The break above the former descending resistance line with a key reference at 1.3385 and the downtrend line that previously capped gains near 1.3482 suggests buyers remain in control, while a Relative Strength Index (14) reading near 54 hints at steady, but not overstretched, momentum.

On the downside, immediate support is located at the recent pivot area around 1.3550, followed by the former trend-line barriers now turned floors at 1.3482 and 1.3385, with the triple SMA and an additional rising support line clustered in the 1.3409–1.3429 region reinforcing the medium-term base. On the topside, the next notable resistance aligns with the broken rising trend line around 1.3644, where a rejection would signal consolidation, while a sustained break higher would open the way for a continuation of the broader bullish advance.

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

• DXY trades just beneath 99.50, down 0.26%, turned back at the 200-day EMA.
• The European Central Bank meets September 9-10, a week ahead of the Fed.
• September hike odds near 60% in the United States, near 84% in Japan.

The US Dollar Index (DXY) trades just beneath 99.50 and 0.26% lower on Monday, on a session that handed it every input a currency is supposed to rally on. American forces struck Iranian launchers on Larak Island, Crude Oil ran better than 2% higher, yields rose across the curve, and pricing for a September Federal Reserve (Fed) increase sits near 60% against roughly 35% before Friday. The Dollar opened on its own 200-day Exponential Moving Average (EMA), poked briefly above it, and has traded beneath it since.

Everybody turned hawkish at the same time

The repricing that followed Friday's Jackson Hole keynote was not an American event, and Monday made that unmistakable. Borrowing costs in the euro area and Japan reached their highest levels in years, Japanese two-year paper touched a 31-year high, German and French two-year yields went to their best since 2024, and longer-dated euro-area yields hit levels not seen in more than fifteen years.

A rate differential requires one side to move alone. What happened instead is that a barrel through the $85.00 handle raised the inflation problem for every major economy at once, and every rates market repriced the same way inside the same six hours. The Dollar cannot be paid a premium for a policy turn its counterparties are also being priced for.

The least certain hiker in its own basket

Basket construction turns that into an outright headwind. The Euro accounts for roughly 58% of the Dollar Index and the Yen for another 14%, so close to three quarters of the thing sits with two central banks now carrying a firmer expectation of a September increase than the Federal Reserve does.

The European Central Bank meets September 9-10 and is widely expected to raise, arriving a full week before the American decision on September 16, with euro-area inflation data this week likely to firm that case rather than soften it. Pricing for a Bank of Japan increase on September 18 runs near 84%. The Federal Reserve sits in the middle of that queue carrying the thinnest conviction of the three. A currency gets paid when the market expects it to tighten harder than the other side, not when the same expectation is sitting on everyone.

The August low was never a monetary event

The base this recovery is climbing off has nothing to do with the policy rate. The Dollar Index made its August low near 98.50 in the sessions after the Treasury expanded long-dated buybacks on August 19, and the mechanism behind that low is a long end carrying supply and term premium rather than rate expectations. Twenty-five basis points on the front end does not retire a single bond.

Monday restated the point in the plainest available terms. Long yields rose and the Dollar fell, which is the behaviour of a credit rather than a currency, and the 30-year reached a 19-year high in mid-August without the Dollar taking any benefit from it. A hawkish central bank helps a currency when the market is worried about inflation. It does considerably less when the market is worried about issuance.

Positioning says the same thing from the other side. A Dollar that cannot hold a gain on the most hawkish domestic headline of the summer, on a day also carrying a live military escalation, does not have buyers stacked underneath it. The haven bid that usually appears on war days went somewhere else this time, and Gold heading for its best month since January is the clearest indication of where.

The week that has to close the gap

Only a genuine American upside surprise narrows any of this, and the calendar gives it four attempts. The Institute for Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) lands Tuesday at 14:00 GMT with prices paid forecast at 72 against 71.1 prior, the private payroll count follows Wednesday at 12:15 GMT at a forecast 47K, and the services reading arrives Thursday with its own prices paid line last at 70.3.

Friday carries the August employment report at 12:30 GMT, with payrolls forecast at 58K after a 23K contraction, the unemployment rate held at 4.1%, and hourly earnings accelerating to 0.3% MoM from 0.1%. The chair has already described the labour market as stable and consistent with full employment, so the report is more likely to confirm the existing path than to steepen it. The gap this index needs is a relative one, and nothing on the American calendar can shrink a relative gap on its own.

Levels to watch

Resistance: The session high stopped on the 200-day EMA, with both sitting just beneath 99.75. Above there the 50-day EMA near 100.00 is declining and has capped every attempt since the first week of August, with the late-July shelf near 100.50 beyond it.

Support: The session floor sits near 99.40, with the 99.00 handle the next shelf beneath it. Below that the August low near 98.50 is the base of the whole move and the level the buyback repricing established.

Bias: Bearish while 99.75 caps, with objectives at the 99.00 handle and then 98.50. The daily Stochastic Relative Strength Index (Stoch RSI) near 30 is turning up out of the oversold band, which normally argues for more bounce, but a bounce that fails at the 200-day EMA on the most hawkish news flow available all summer has answered the question. Invalidation on a daily close above 100.00.

DXY daily chart

• DJIA trades near 53,250, roughly 300 points lower, with the 53,500 shelf gone.
• One energy stock, 2.2% of the index, against more than a quarter in financials.
• September hike odds near 60%, up from 35% before Friday's keynote.

The Dow Jones Industrial Average (DJIA) trades near 53,250, roughly 300 points lower on the session on Monday, after American forces struck two Iranian rocket launchers on Larak Island and Tehran answered with attacks on bases in Jordan and assets in the United Arab Emirates. Crude Oil ran better than 2% higher through the $85.00 handle on the news, and Treasury yields rose alongside it rather than falling. A shock that lifts the barrel and the cost of money at once is not a risk-off event for this index. It is a tightening event.

The hedge that stopped working

The reflex on a Middle East escalation is to sell equities and buy government bonds, and Monday declined to follow it. Longer-dated Treasury yields pushed higher through the session, short-dated borrowing costs across Europe reached multi-year highs, and Japanese two-year paper touched a level last seen thirty-one years ago. Bonds sold on a war headline because this war is being priced as a cost story rather than a growth story.

The transmission is direct enough to trace. Disrupted traffic through the Strait of Hormuz raises the delivered cost of energy, energy runs straight into goods inflation, and the Federal Reserve chair used his first Jackson Hole keynote on Friday to say that better summer readings had not persuaded him that underlying trends were improving. The benchmark Gulf-to-Japan large tanker rate set a record above $107 per metric ton on August 27, which is a freight market pricing the risk rather than a headline market reacting to it.

Rate futures did the rest of the work. Pricing for a September increase sits near 60% against roughly 35% before Friday, a move that would take the target range to 3.75% to 4.00% and reverse the direction every equity model built over the past two years assumed. Nothing in Monday's headlines argues the other way, because the escalation and the inflation risk are the same trade.

One energy stock against a quarter of the index

Price weighting decides how that lands inside this particular average, and the arithmetic runs against it. Chevron (CVX) has been the only energy company in the index since ExxonMobil was removed in 2020, and at roughly 2.2% of index weight it is the whole of the hedge. Financials carry better than a quarter of the index across five names, with Goldman Sachs (GS) alone near 11.5% on a share price above $1,000.

The index is therefore structurally on the wrong side of its own geopolitical story, with barely two points of weight benefiting when a supply shock lifts the barrel and more than twelve times that much sitting in the block most exposed to a front end moving toward a hike. Alphabet (GOOGL) took Verizon's seat at the end of June, which stripped the last telecom ballast out of the average and replaced it with a name that trades on duration.

The same mechanism explains why August's technology rally largely passed the index by. Nvidia (NVDA) is worth roughly 2.4% here and Microsoft (MSFT) roughly 5.7%, so a month in which artificial intelligence names carried the broader benchmarks left this one on track for a fifth straight monthly advance and still some 3% beneath the record it set in the first week of August.

The numbers that carry the week

Friday's employment report is the advertised event, with August payrolls forecast at 58K after a 23K contraction, the unemployment rate held at 4.1%, and average hourly earnings accelerating to 0.3% MoM from 0.1%. The chair has already described the labour market as stable and consistent with full employment, and has said wage growth stopped being a reliable guide to future inflation a long time ago. Most of the policy content is drained out of that report before it prints.

The releases carrying an actual reaction function land earlier in the week. The Institute for Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) arrives Tuesday at 14:00 GMT with the prices paid component forecast at 72 against 71.1 prior, and the services reading follows Thursday with its own prices paid line last at 70.3. Those two subindices are where an energy shock shows up first, and they measure the one variable the chair says has not improved.

Between them sit the private payroll estimate on Wednesday at 12:15 GMT, forecast at 47K against 44K, and the Beige Book at 18:00 GMT the same day. The decision lands September 16, and with three policymakers scheduled to speak before Friday, the tone that moved the front end last week has more room to be reinforced than walked back.

Levels to watch

Resistance: The 53,500 handle turned the session high back and now caps what it supported last week. Above it the band just above 53,800 has rejected every attempt since mid-month, with 54,000 and the record just short of 54,750 beyond.

Support: The session floor sits in the 53,100 area, with the 53,000 handle the next shelf beneath it. Below there the rising 50-day Exponential Moving Average (EMA) near 52,700 is the line the August advance was built on, and the 200-day EMA near 50,000 is nowhere near play.

Bias: Bearish while 53,500 caps, with objectives at the 53,000 handle and then 52,700. The daily Stochastic Relative Strength Index (Stoch RSI) near 35 is falling through the lower half of its range with no divergence to argue against it. Invalidation on a daily close above 53,800.

Dow Jones daily chart

• USD/JPY retreats to 159.80 on Monday after briefly moving above the psychological 160.00 level.
• Scott Bessent expects Japanese authorities to take measures that will lead to a stronger Japanese Yen.
• Investors now turn to US manufacturing activity and labor market data for fresh direction.

USD/JPY declines 0.21% on Monday and trades around 159.80 at the time of writing, after briefly moving above the psychological 160.00 level. The Japanese Yen (JPY) attracts fresh buying as comments from US Treasury Secretary Scott Bessent reinforce expectations that authorities could support the Japanese currency.

Bessent said on Monday that he believes the Japanese government and the Bank of Japan (BoJ) will take measures that will lead to a stronger Japanese Yen. His comments come as the weakness of the Japanese currency remains in focus following the recent surge in USD/JPY toward levels that have previously prompted authorities to intervene in the foreign exchange market.

Concerns over another intervention remain elevated following USD/JPY's move above 160.00. Data from Japan's Ministry of Finance released on Friday showed that Japan spent a record ¥15.4 trillion between July 30 and August 26 to support its currency after the pair reached a multi-decade high near 164.00.

Expectations surrounding Japanese monetary policy also provide some support to the Japanese Yen. Investors anticipate a more restrictive stance from the Bank of Japan, although the country's expansionary fiscal policy, high level of government debt and still relatively low interest rates continue to limit the currency's appreciation potential.

Meanwhile, the US Dollar (USD) trades lower, adding further downside pressure to USD/JPY. Investors now turn to a series of US economic releases that could influence expectations surrounding the interest rate outlook.

The Institute for Supply Management (ISM) is scheduled to release its Manufacturing Purchasing Managers Index (PMI) for August on Tuesday, while the July Job Openings and Labor Turnover Survey (JOLTS) will provide fresh clues about the health of the US labor market. These releases could determine whether the current weakness in the US Dollar persists and, consequently, whether USD/JPY can extend its decline below 160.00.

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 159.74, holding a mildly bullish near‑term bias as it remains above the 100-hour simple moving average (SMA) at 159.47 and the 200-hour SMA at 159.17, as well as the rising trend-line support around 159.55. The Relative Strength Index (RSI) at 47.82 sits just below the neutral 50 mark, hinting at consolidative rather than impulsive momentum after the recent pullback from the 160.20 horizontal cap.

On the topside, initial resistance is seen at the horizontal barrier near 159.92, ahead of the recent swing high at 160.20, where buying interest has so far stalled. On the downside, immediate support is provided by the trend-line zone around 159.55, followed by the 100-hour SMA at 159.47 and the deeper 200-hour SMA near 159.17, where a break would weaken the current constructive tone and expose a broader corrective phase.

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

• Gold finds some stability after falling to its lowest level since August 19.
• Higher-for-longer interest-rate expectations remain the main hurdle for the non-yielding metal.
• XAU/USD needs to reclaim the 200-day SMA to ease the latest bearish pressure.

Gold (XAU/USD) fluctuates between gains and losses on Monday after opening the week lower and briefly falling below $4,400, its lowest level since August 19, during Asian trading hours. The metal retains a near-term bearish bias as hawkish Federal Reserve (Fed) expectations keep buyers cautious. At the time of writing, XAU/USD trades around $4,435, after reaching a more than three-month high of $4,697 last week.

The Yellow metal fell about 3.20% on Friday following Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium. Markets viewed Warsh’s remarks as hawkish, reviving expectations that the central bank could raise interest rates as soon as September and pushing the US Dollar (USD) and short-term US Treasury yields sharply higher.

Analysts at Rabobank point out that Warsh made clear that he is “open to further rate hikes unless underlying inflation began to improve convincingly,” underscoring that “we must be convinced that underlying inflation is moving toward our target clearly and at a sufficient pace. Otherwise, we still have work to do.”

According to the CME FedWatch tool, markets are now pricing in around a 66% chance of a September rate hike, up from roughly 38% before Warsh’s speech. A higher interest-rate environment reduces the attractiveness of Gold because the metal offers no yield.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.41, easing from 99.72, its highest level since August 14. The modest pullback in the Greenback lends some support to Gold, although US Treasury yields remain elevated near recent highs, with the benchmark 10-year yield climbing to around 4.75%, its highest level since January 2025.

Meanwhile, renewed US-Iran hostilities keep Oil prices elevated, adding upside risks to inflation. Iran said it attacked US bases in Jordan after US strikes on Larak Island. US President Donald Trump told Fox News that Washington would respond to Iran’s attack on US forces. US Treasury Secretary Scott Bessent said, “Operation Outcast will make Iran want to make a deal,” adding that “the goal is to create a condition where they want to come to the table.”

In the near term, expectations that the Fed's interest rates will stay higher for longer remain a key hurdle for Gold’s recovery, even as central-bank buying and geopolitical tensions provide underlying support. Gold is still on track to gain around 10% in August, largely driven by the US Treasury’s announcement that it would double liquidity-support buybacks of longer-dated government bonds.

Upcoming US economic data will be closely watched for fresh clues about the Fed’s monetary policy path, with the ISM Purchasing Managers Index (PMI) surveys and Nonfarm Payrolls (NFP) report among the key risk events this week.

Technical analysis: Momentum weakens after rejection near $4,700

XAU/USD maintains a slightly bearish near-term bias following the latest leg lower, with the metal falling back below the 200-day Simple Moving Average (SMA) at $4,528. The Relative Strength Index (RSI) on the daily chart has eased from overbought territory to around 52, pointing to fading bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) has slipped marginally below its signal line, adding to signs of weakening upside pressure.

On the downside, initial support is located at the 100-day SMA at $4,370, followed by the 50-day SMA at $4,211. A sustained break below these levels could expose the horizontal floor near $4,000. On the upside, the 200-day SMA at $4,528 acts as immediate resistance, followed by the horizontal barrier at $4,700.

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

BNY’s Wee Khoon Chong highlights that China’s factory slump is easing, with manufacturing PMI edging higher and export orders returning to expansion, while services and construction remain weak. Authorities announced property market reforms to strengthen homebuyer protections, shift toward completed‑home sales and extend mortgage terms, alongside efforts to broaden financing channels for viable developers.

PMI stabilization and housing overhaul

"Chinese factory slump eases, but weak services signal uneven recovery."

"China’s August PMI release showed a modest improvement in factory activity, while non-manufacturing remained weak. The manufacturing PMI rose to 49.8% in August (49.2% in July), with large firms returning to expansion at 50.6%."

"China has announced property market reforms aimed at strengthening homebuyer protections and accelerating the shift to a new housing development model. The measures tighten presale rules, promote completed-home sales and require more safeguards for buyer funds through regulated accounts and “handover with certificate” practices."

"For homes sold after completion, mortgage disbursement will only occur after sales registration; for presold projects, funding will be delayed until formal completion registration. Authorities also extended the maximum term of individual home loans to 40 years from 30 years."

"In parallel, regulators said developers’ reasonable financing needs should be better met, with a greater focus on project viability, and financing channels will be broadened through equities, bonds, asset-backed securities and REITs. The package is designed to reduce delivery risks, improve transparency, raise housing quality and support safer transactions."

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

Scott Bessent, the US Treasury Secretary, crossed the wires in an interview with CNBC, saying Oil prices will come down and that US President Donald Trump has been saying that Iran is not ready for a deal.

He added he believes the Bank of Japan and the Japanese government will do things that will lead to a strong Yen. Bessent added that he will meet with his Canadian counterpart, assuring that “we are not in war with Canada."

Key highlights:

OPERATION OUTCAST WILL MAKE IRAN WANT TO MAKE A DEAL. THE GOAL IS TO CREATE A CONDITION THAT THEY'D WANT TO COME TO THE TABLE

WE HAVE MORE IN COMMON WITH CHINA ON IRAN THAN WE DISAGREE ON

FED'S CHAIR WARSH AND I ARE ON THE SAME PAGE ON BONDS

I AM NOT GOING TO SPECULATE ON WHAT THE FED MAY DO OR NOT

TRADITIONALLY, YOU DON'T RAISE RATES INTO A SUPPLY SHOCK

CORE INFLATION HAS REMAINED VERY RESTRAINED

MY BELIEF IS THAT JAPANESE GOVERNMENT AND BOJ WILL DO THINGS THAT WILL LEAD TO A STRONGER YEN

MEETING WITH CANADIAN COUNTERPART

WE ARE NOT IN WAR WITH CANADA

CARNEY NOT DOING WHAT'S BEST FOR CANADIAN PEOPLE

• USD/CHF retreats as the US Dollar Index eases from a more than one-week high.
• Markets raise Fed interest rate hike bets following Warsh’s Jackson Hole speech.
• Swiss bankers expect the SNB to keep interest rates unchanged through 2026.

USD/CHF trades with a downside bias on Monday as the US Dollar (USD) struggles to gain traction despite rising Federal Reserve (Fed) interest rate hike expectations and Middle East tensions. At the time of writing, the pair trades around 0.8080, down roughly 0.15% on the day.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.41, easing from last week’s high of 99.72.

The Greenback climbed to its highest level in more than a week on Friday following hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole Symposium. Strategists at Scotiabank note that Kevin Warsh used his Jackson Hole appearance to “correct the impression of evasiveness and opacity” that had characterized his remarks following the July FOMC. In their view, he “effectively removed ambiguity around the Fed’s inflation target” and delivered a clear warning that unless inflation makes progress towards the 2% objective “with speed.”

Meanwhile, renewed hostilities between the United States (US) and Iran are keeping Oil prices elevated, which could make it harder for inflation to return to the Fed’s 2% target and strengthen the case for tighter monetary policy.

According to the CME FedWatch tool, traders are pricing in around a 65% chance of a rate hike next month. This week’s US ISM Purchasing Managers Index (PMI) surveys and Nonfarm Payrolls (NFP) report could influence expectations for the Fed’s September decision.

On the Swiss side, Reuters reported on Monday that a Swiss Bankers Association survey showed all participating bankers expect the Swiss National Bank (SNB) to keep its policy rate unchanged at 0% for the rest of 2026. Around 60% also expect the central bank to leave rates unchanged throughout 2027.

Looking ahead, Swiss Retail Sales data are due on Tuesday, followed by the Consumer Price Index (CPI) and second-quarter Gross Domestic Product (GDP) figures on Thursday.

• USD/CAD falls 0.24% on Monday, supported by strength in the Canadian currency.
• Rising Oil prices underpin the Canadian currency amid escalating tensions in the Middle East.
• Expectations of a US interest rate hike in September, however, limit the pair’s downside.

USD/CAD falls 0.24% on Monday and trades around 1.3870 at the time of writing, after reaching its highest level in more than two weeks earlier. The pair comes under pressure from both a stronger Canadian Dollar (CAD), supported by rising Oil prices, and a modest pullback in the US Dollar (USD).

Oil prices advance as tensions between the United States (US) and Iran intensify. US forces struck two rocket launchers on Iran’s Larak Island in the Strait of Hormuz on Sunday, prompting Tehran to retaliate with ballistic missiles targeting two US bases in Jordan.

US Treasury Secretary Scott Bessent also said that new secondary sanctions could be announced on a weekly basis to increase pressure on Iran. The geopolitical escalation fuels concerns over energy supplies and supports Oil prices, benefiting the Canadian Dollar given Canada’s role as a major Oil producer and exporter.

Meanwhile, the US Dollar gives back some of Friday’s strong gains, adding downward pressure on USD/CAD. However, the Greenback’s decline remains limited by renewed expectations of monetary tightening from the Federal Reserve (Fed).

Fed Chair Kevin Warsh said at the central bank’s annual symposium in Jackson Hole that interest rates may need to rise if progress in easing inflationary pressures remains insufficient. Higher energy prices also add to inflation risks and reinforce expectations of a potential rate hike as soon as September, providing some support to the US Dollar.

On the Canadian side, intensifying trade tensions between the United States and Canada could nevertheless limit the Canadian Dollar’s appreciation and prevent a more pronounced decline in USD/CAD.

Investors now turn their attention to the Bank of Canada (BoC) monetary policy decision on Wednesday. The monthly employment reports from the US and Canada, due on Friday, should then provide further clues about the economic and monetary policy outlook in both countries.

Canadian Dollar holds near fair value as BoC and jobs data come into focus

Strategists at Scotiabank note that the Canadian Dollar is steady, with the CAD “little changed on the session” and spot having “spent the past week trading at or a little below our estimated fair value.” They add that the currency “continues to outperform, if only modestly, against that benchmark this morning.”

Scotiabank reports that “our fundamental equilibrium estimate has nudged a little higher since Friday to 1.3920, reflecting wider front-end US/Canada swap spreads in the main.” In their view, “CAD resilience in the face of volatile Fed expectations and the latest round of trade uncertainty is impressive and reaffirms our view that there is limited downside potential in the CAD currently.” However, they caution that “equally, however, scope for gains is curtailed by the wide rate gap.”

Looking ahead, the bank highlights that “the Canadian calendar is relatively busy this week.” They expect Wednesday’s BoC policy decision “is not expected to reflect any change in policy or indeed in the Bank’s cautious view of the outlook,” while Friday’s jobs report “is expected to reflect a moderate gain in employment (15k) after the solid July report.”

USD/CAD technical analysis

In the one-hour chart, USD/CAD trades at 1.3871, holding a mildly bullish intraday bias as it remains above the 100-period simple moving average (SMA) at 1.3869 and the 200-period SMA at 1.3838. The pair is consolidating after failing to extend gains through nearby horizontal resistance at 1.3910, while the Relative Strength Index (RSI) around 38 suggests fading bullish momentum and warns that the upside impulse is losing strength.

On the topside, initial resistance is located at 1.3910, with a subsequent barrier at 1.3958, where further buying could stall. On the downside, immediate support is found at the 100-period SMA at 1.3869, followed by the horizontal floor at 1.3845 and then the 200-period SMA at 1.3838, which together define the key area that bulls would need to defend to prevent a deeper corrective slide.

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