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Indian Rupee drops with India-US CPI data in focus

  • The Indian Rupee declines further against the US Dollar due to rising oil prices.
  • Traffic through the Hormuz has declined significantly.
  • Investors keenly await the India-US CPI data for July.

The Indian Rupee (INR) extends its decline against the US Dollar (USD) on Wednesday as the former continues to face pressure due to surging oil prices.

At press time, USD/INR trades slightly higher to near 95.45. The MCX Crude Oil contract expiring on August 19 trades 0.6% higher to near Rs. 8,000.

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-US CPI data awaited

In Wednesday’s session, major triggers for the USD/INR pair will be the Consumer Price Index (CPI) data for July of both India and the US.

India’s retail CPI data is scheduled to be released at 04:00 PM (10:30 GMT). Economists at DBS Group Research note that key “inflation numbers are due in the second week of August,” with “headline inflation in July… largely steady at 4.4% YoY vs June.” They point out that high-frequency indicators for food staples “point to a rise in pulses, sugar, milk and edible oils, while vegetables have stabilized,” adding that “a catch-up in rainfall in July has helped boost sowing activity.”

DBS also highlights that “adjustments in domestic retail fuel products (non-subsidized LPG was up 10% YoY in July) are also likely to reflect in the utilities and fuel segments.” Even so, the bank expects underlying price pressures to remain contained, with “core readings… benign at sub-4% in July, helped also by moderation in precious metals in the period.”

The major highlight will be the US inflation data, which 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 regarding 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 recovers to near 95.40

USD/INR is inching closer to the 20-day exponential moving average (EMA) at 95.52, which is above the price, hinting at a shift in the near-term bias from bearish to neutral.

The Relative Strength Index (14) around 48 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.

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Chart of the Day: EURUSD Awaits US CPI. Inflation Could Determine the Fed’s Next Move

Wednesday’s EURUSD session is primarily focused on anticipation of the day’s most important release: US CPI inflation data. Today’s reading could play a major role in determining how the market prices the Federal Reserve’s next meeting. In recent days, expectations for further rate hikes in the US have clearly weakened. The main reason has been weaker labor market data. Both the ADP report, which showed just 44,000 new private-sector jobs, and the subsequent NFP report came in weak. In July, nonfarm payrolls fell by 23,000, while the market had expected an increase of around 80,000. Previous months’ data were also revised sharply lower. As a result, the market has become increasingly skeptical about further Fed rate hikes. Today’s inflation data could either reinforce that view or challenge it once again. If CPI comes in below expectations, there will be even fewer arguments for further monetary tightening. If, on the other hand, inflation surprises to the upside again, the market could quickly return to pricing higher US interest rates. On the other side is the European Central Bank. The ECB has already raised interest rates this year, and the market is pricing in another move in September. Expectations for a September rate hike are currently very high. In addition, today’s German data confirmed that inflation remains elevated. CPI rose by 0.8% month-on-month and 2.8% year-on-year in July. HICP increased by 0.9% month-on-month and 2.8% year-on-year. This puts EURUSD in a particularly interesting position. On the dollar side, we have an increasingly weak labor market and declining expectations for Fed rate hikes. On the euro side, inflation is still providing the ECB with arguments for maintaining a restrictive monetary policy.

Source: xStation5

Factors Currently Shaping EURUSD

Today’s CPI report is undoubtedly the most important event for EURUSD. The market expects inflation to have risen by 3.4% year-on-year in July, compared with 3.5% in June. Core inflation is expected to increase by 2.5% year-on-year. However, the actual reading will only be the first piece of the puzzle. Much more important will be the market’s reaction to the data and how expectations for future Fed policy change. If inflation comes in below expectations, the market may further reduce the probability of another rate hike. In such a scenario, US Treasury yields could fall and the dollar could come under pressure. This would be a positive signal for EURUSD. Conversely, higher-than-expected inflation could reverse part of this move. Following very weak labor market data, the market now needs another argument to return to pricing in rate hikes. A strong CPI reading could provide exactly that. It is also important to remember that inflation remains above the Fed’s target. Therefore, even a weaker reading does not automatically mean that the central bank will have to start cutting rates quickly. For the market, the more important question right now is whether the argument for further rate hikes disappears.

Weak Labor Market Has Changed Expectations for the Fed

Until recently, the prospect of further rate hikes in the US was much more realistic. The situation changed following a series of weaker labor market reports. The July ADP report showed private-sector employment growth of just 44,000 jobs. A few days later, the NFP report delivered an even bigger disappointment. Nonfarm payrolls fell by 23,000, compared with expectations for an increase of 80,000. Previous data were also revised sharply lower. The labor market is now one of the main arguments against further Fed rate hikes. If the economy is clearly losing momentum in terms of employment, the central bank has fewer reasons to raise the cost of borrowing even further. Today’s CPI could therefore be the missing piece of the puzzle. Weaker inflation combined with a weak labor market would send the Fed a very clear signal that further rate hikes are not necessary.

The ECB Has a Completely Different Problem

The situation on the euro side currently looks different. The European Central Bank has already started a rate-hiking cycle this year, and the market expects another move in September. Importantly, expectations for the September decision are very high. This means the market is already largely pricing in another ECB move, making what the central bank does afterward even more important for the euro. If inflation remains elevated, the ECB may have arguments for maintaining a more restrictive stance. Today’s German data fit well into this picture. CPI and HICP inflation stood at 2.8% year-on-year in July, while monthly price growth also remained high. This does not, of course, mean that German inflation alone will determine ECB decisions. It is nevertheless an important part of the inflation picture across the euro area.

The Difference in Fed and ECB Expectations Is Starting to Favor the Euro

This is currently the most interesting aspect for EURUSD. Until recently, the main problem for the euro was the Fed’s advantage resulting from high interest rates and expectations of further tightening in the US. Now, the situation is beginning to change. The market has reduced expectations for further Fed rate hikes, while at the same time maintaining a high probability of another ECB rate hike in September. If today’s US CPI is weak, the divergence in expectations for the two central banks’ policies could shift even further in favor of the euro. That would provide another argument for EURUSD to move higher. If, however, US inflation comes in above expectations, the dollar could quickly regain some of its advantage. In that case, the market would once again question whether the Fed has actually reached the end of its rate-hiking cycle.

Key Takeaways

  • Today’s US CPI report is the most important event for EURUSD and could have a significant impact on expectations for the Fed’s next meeting.
  • Weak labor market data, including a very weak NFP report and a weak ADP reading, have clearly reduced expectations for further US rate hikes.
  • A lower-than-expected CPI reading could further confirm that the Fed will have little reason to raise rates again this year.
  • The ECB is currently in a different position. The central bank has already raised rates this year, and the market is pricing in another rate hike in September with a very high probability.
  • Today’s German data showed inflation at 2.8% year-on-year for both CPI and HICP, providing little evidence that the ECB should quickly move away from a restrictive monetary policy.
  • For EURUSD, the key question now is whether US CPI confirms the weaker picture of the US economy. If it does, the divergence in monetary-policy expectations could increasingly shift in favor of the euro.
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Trade of The Day: AUS/USD

Facts

  • AUDUSD has been holding above the 10-day exponential moving average (EMA10; yellow) for seven consecutive sessions.
  • Michele Bullock, Governor of the RBA: “We may need further interest rate hikes.”
  • The probability of an interest rate hike in Australia by the end of 2026 increased from approx. 50% to approx. 67% over the past week.

Recommendation

  • Position: Long (BUY) on AUDUSD at market price
  • Target Price (Take Profit; TP): 0.71400 (TP1), 0.71850 (TP2)
  • Stop Loss (SL): 0.70000

Source: xStation5

Opinion

The AUDUSD exchange rate has been moving in an uptrend since early July, reinforced by the dovish tone of the July FOMC meeting. Currently, the swap market prices in roughly a 50% chance of a September rate hike, marking a sharp decline from expectations prior to the Fed’s latest decision (when probability sat near 100%). Monetary support for the dollar weakened further following an unexpected decline in US payrolls according to the latest NFP report. Furthermore, consensus estimates for the upcoming inflation report project CPI falling to 3.4% YoY—its lowest level since April 2026. Despite a recent correction, US Treasury yields remain higher than before Kevin Warsh took over as Fed Chair, meaning that even a higher-than-expected CPI reading is unlikely to back the Fed into a corner regarding rate hikes, thereby limiting the potential for a pro-dollar surprise. Conversely, market pricing for Australian rate hikes shifted higher following today’s RBA decision. While the Australian central bank kept interest rates on hold at 4.35% and presented more dovish economic forecasts, Governor Michele Bullock’s comments keep markets on high alert. In addition to acknowledging the potential need for further hikes, Bullock signaled that the RBA requires more time to feel confident that inflation is cooling down—especially given the recent record employment surge of 76,000 jobs. Recent shifts in central bank communications, alongside dynamics in bond and interest rate markets, support a continuation of the AUDUSD uptrend. A potential dip in global risk appetite stemming from escalation in the Middle East remains a key risk factor, though volatility on the pair is becoming increasingly desensitized to geopolitical swings.

Shift in Australian monetary policy expectations (red: current pricing, blue: one week ago, gray: 4 weeks ago). Source: XTB Research, Bloomberg WIPR OIS data.

Methodology

This recommendation was prepared based on a technical analysis of the AUDUSD chart and a fundamental analysis of the respective economies (monetary policy in Australia and the US). The directional bias was determined using moving averages and market expectations regarding central bank policies. Take Profit and Stop Loss levels were established using Fibonacci retracements and price action:

  • TP1 is set at the late May / early June resistance level.
  • TP2 is set at the 78.6% Fibonacci level.
  • SL is placed at the July support level, which coincides with the 100-day dark violet EMA.
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Swiss Franc weakens as market caution lifts US Dollar

  • USD/CHF rises as the US Dollar erases losses following an oil rally driven by geopolitical tensions.
  • Rising energy prices and Treasury yields stoked fears of early Fed rate hikes despite a cooling labor market.
  • Swiss inflation unexpectedly dropped to a four-month low of 0.4% in July, defying Swiss National Bank expectations.

USD/CHF extends its gains for the second successive day, trading around 0.8110 during the early European hours on Tuesday. The currency pair has pushed higher as the US Dollar (USD) erased its intraday losses, fueled by a sharp rally in crude oil driven by heightened geopolitical tensions.

This surge in energy prices has dragged Treasury yields upward, stoking market fears that the Federal Reserve (Fed) might be forced to hike interest rates sooner than expected, even as the labor market continues to cool. Consequently, investors are sharply focused on this week’s inflation metrics for clearer policy signals, with the CME FedWatch Tool now pricing in nearly 52% probability of a 25-basis-point rate hike in September, up from 44.4% just a day ago.

USD seen rangebound as Fed hike bar stays high and oil gains capped

Analysts at OCBC argue that the inflation hurdle for a September Fed move remains significant, noting that “core CPI would need to print at 0.3% MoM or higher in July, above the 0.2% consensus forecast, to materially lift expectations of a September rate hike.” In their view, a “range-bound USD, combined with a constructive risk backdrop, should continue to support carry trades despite ongoing volatility in oil markets.” They add that recent “oil prices eased on hopes that the Strait of Hormuz could reopen, but Iran’s firm conditions for Washington suggest any near-term boost to energy supply is likely to be limited,” tempering expectations for a sustained pullback in energy prices.

Adding to the hawkish momentum, Cleveland Fed President Beth Hammack emphasized that the central bank will likely need to execute multiple rate hikes to get broad-based inflation under control. Speaking with Yahoo Finance, Hammack, who notably dissented at the July meeting in favor of an immediate hike, argued that current policy remains insufficiently restrictive. She highlighted the upcoming Consumer Price Index report as a pivotal test that will dictate the Fed’s trajectory moving forward.

In contrast, Swiss inflation cooled to a four-month low of 0.4% year-over-year in July, falling from 0.5% in the previous month and showing remarkably little pass-through from global energy price shocks. The unexpected drop defied the Swiss National Bank’s expectations for a minor inflationary uptick after holding its policy rate at 0%. Bolstered by a resilient banking sector, the SNB is widely expected to keep rates on hold through the end of the year, treating additional rate cuts as a fallback option rather than the primary path.

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Chart of the Day: USDJPY Rises Again. Intervention Is Not Enough — Markets Await BoJ Action

USDJPY is once again moving higher, while the yen is beginning to give back some of the gains it made following the joint intervention by Japan and the United States at the end of July. It was an exceptionally strong response from the authorities, which helped push USDJPY sharply lower in a short period of time and gave the yen some much-needed relief. The problem is that just a few days later, the market is once again testing the weakness of the Japanese currency. This shows that FX intervention can be an effective tool for stopping a sharp move, but it may not be enough to produce a lasting change in the trend. In the case of the yen, the underlying problem is much deeper. The gap between interest rates in the United States and Japan remains very wide, and this has been one of the key reasons behind the persistent pressure on the Japanese currency. The market is therefore paying increasing attention to what could happen at the Bank of Japan’s September meeting. There are growing signals that the BoJ could decide to raise interest rates again on September 17–18. Such a move would be far more important for the yen than intervention alone, as it would represent a genuine change in the interest-rate differential between Japan and the United States.

Source: xStation5

Factors Currently Driving USDJPY

Intervention Gave the Yen Some Relief, but the Effect Is Quickly Fading

At the end of July, USDJPY approached levels that were difficult for Japanese authorities to accept. The response was particularly decisive, as the United States also joined Japan in taking action this time. The joint operation quickly reversed part of the previous move and led to a strong appreciation of the yen. Initially, the effect was very clear. USDJPY fell toward 157, and the market once again began to consider the possibility of a lasting trend reversal. Today, the situation looks different. The pair is rising again, while support for the yen is starting to look increasingly fragile. The market is paying attention to the fact that Tokyo did not follow up the intervention with further aggressive action, which could indicate that policymakers primarily want to limit excessive market moves rather than permanently target a specific exchange-rate level. This is precisely why intervention alone does not solve the problem. It can stop the market for several days or weeks, but if the underlying conditions remain unchanged, pressure on the yen can quickly return.

The BoJ Needs to Do More Than Just Intervene

The most important piece of the puzzle remains the Bank of Japan’s monetary policy. The BoJ has begun the process of normalizing monetary policy and has already raised interest rates. The market is increasingly expecting that this was not the final move. Recent reports suggest that the central bank could decide to raise rates again at its September 17–18 meeting. For the yen, this would be a much more important signal than another round of FX intervention. A rate hike would narrow the interest-rate differential between US and Japanese assets, reducing the attractiveness of strategies that involve funding investments in higher-yielding currencies with the yen. For now, however, the market still needs to see whether the BoJ will actually be willing to act. The possibility of a September rate hike provides some support for the yen, but only an actual decision — combined with guidance on future moves — could change the market outlook in a more lasting way.

The Interest-Rate Differential Remains a Problem for the Yen

Even if the BoJ raises rates in September, the gap between US and Japanese interest rates will remain significant. This is where the main problem for the Japanese currency lies. The market may buy the yen for some time in anticipation of a BoJ move, but if the central bank signals a prolonged pause after the hike, the dollar’s advantage could quickly return. For this reason, a rate hike alone may not be enough. What will matter much more is whether the BoJ can convince the market that it is beginning a longer-term process of monetary policy normalization. If that happens, USDJPY could enter a more sustained downtrend. If, on the other hand, the BoJ remains cautious while the Fed keeps rates elevated for an extended period, pressure on the yen could return despite another rate hike.

The Market Is Testing Tokyo’s Credibility Again

The latest intervention was also exceptional because both Japan and the United States participated. Such a move strengthened the signal sent to the market and showed that authorities were prepared to act against excessive yen weakness. The problem, however, is that the market is already beginning to test how long that signal will remain effective. If USDJPY once again approaches the levels that previously triggered intervention, Tokyo will face a difficult choice. Another intervention would send a very strong signal, but it would become increasingly difficult to convince the market that government action can permanently reverse the trend without support from monetary policy. That is why the BoJ’s September meeting could be more important than the intervention itself. The market will want to see whether the central bank is genuinely prepared to use interest-rate policy as the second pillar in its efforts to combat yen weakness.

USDJPY Is Rising Again, but September Could Change the Picture

The current rise in USDJPY shows that the effect of the joint Japan-US intervention is gradually fading. The yen received several weeks of relief, but the fundamentals of the FX market have not changed enough to suggest that a lasting trend reversal is underway. Attention is now shifting toward the Bank of Japan. If the BoJ does indeed raise rates in September and its communication signals the possibility of further moves, the yen could receive much stronger and more durable support. If, however, the Japanese central bank raises rates but leaves the market with the impression that further hikes will be difficult to achieve, USDJPY could resume its upward move. For now, the market is showing that intervention alone has not been enough. Japan needs not only to sell dollars and buy yen, but above all to narrow the interest-rate differential. This is precisely why the BoJ’s September meeting could be one of the most important events for USDJPY during the entire third quarter.

Key Takeaways

  • USDJPY is rising again, showing that the effect of the latest joint Japan-US intervention is beginning to fade.
  • The intervention helped strengthen the yen sharply, but it did not change the underlying fundamentals of the market.
  • The key factor for the yen remains the large interest-rate differential between the United States and Japan.
  • The market is increasingly pricing in the possibility of another BoJ rate hike at the September 17–18 meeting.
  • If the BoJ signals further monetary policy normalization, the yen could receive significantly more durable support than it did from intervention alone.
  • If the Japanese central bank remains cautious, USDJPY could come under renewed upward pressure.
  • For the yen, the key question is therefore not whether Tokyo can intervene again, but whether the BoJ is prepared to raise rates quickly enough to actually change the fundamentals behind the Japanese currency’s weakness.
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Indian Rupee opens lower as Trump demands war compensation

  • The Indian Rupee falls further against the US Dollar as oil prices extend the advance.
  • US President Trump demands reparations for the war, as Iran did the same.
  • Investors await the CPI data for July from both India and the US.

The Indian Rupee (INR) opens on a cautious note against the US Dollar (USD) on Tuesday. The USD/INR pair rises further to near 95.40 as surging oil prices due to escalating fears of a prolonged global supply disruption have weakened the Indian currency.

In the opening session, the MCX Crude Oil contract expiring on August 19 trades 0.45% higher to near Rs. 7,835, closer to its weekly high.

Trump also demands reparations for war

On Monday, United States (US) President Donald Trump also demanded compensation for war casualties in the Middle East from Iran, through a post on Truth Social, in a direct answer to Iran’s own call for compensation, as a key condition for reopening the Strait of Hormuz, a vital passage to almost one-fifth of global energy supply.

US President Trump added that Iran should be held “responsible for the damages and death” caused to the people of Lebanon, Syria, Yemen and Gaza.

Over the weekend, Iran’s Mohammad Bagher Zolghadr, secretary of the council, set out six conditions for the Hormuz reopening.

Both sides demanding compensation for war damages have heightened uncertainty over the truce in the near term, boosting oil prices.

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.

India-US CPI data comes under the spotlight

This week, the major trigger for the Indian Rupee and the US Dollar will be respective Consumer Price Index (CPI) data for July from their economies, which will be released on Wednesday.

India inflation holds steady as DBS flags mixed food trends and benign core

Economists at DBS Group Research note that key “inflation and trade numbers are due in the second week of August,” with “headline inflation in July… largely steady at 4.4% YoY vs June.” They point out that “high frequency data on food staples point to a rise in pulses, sugar, milk and edible oils, while vegetables have stabilized,” adding that “a catch-up in rainfall in July has helped boost sowing activity.” On the price side, DBS highlights that “adjustments in domestic retail fuel products (non-subsidized LPG was up 10% YoY in July) are also likely to reflect in the utilities and fuel segments.” Even so, they expect underlying pressures to remain contained, with “core readings… benign at sub-4% in July, helped also by moderation in precious metals in the period.”

In the US, both headline and core CPI are expected to have cooled down, with figures seen arriving lower at 3.4% and 2.5% Year-on-Year (YoY), respectively.

Signs of US inflationary pressures cooling down would ease fears of Federal Reserve (Fed) interest rate hikes further. This week, financial markets have rolled back hawkish Fed after the release of the US Nonfarm Payrolls (NFP) data for July, which showed a reduction in the overall labor force against estimates of a fresh addition of 80K workers.

Technical Analysis: USD/INR holds key 60-day EMA

In the daily chart, USD/INR trades at 95.40. The pair holds above the 60-day exponential moving average (EMA) at 95.26, keeping a modest bullish near-term bias as price respects this dynamic support zone.

Momentum is less conclusive, with the 14-day Relative Strength Index (RSI) hovering near 47, hinting at a consolidative tone rather than strong directional conviction, but the preservation of levels above the EMA favors mild upside while this floor holds.

On the downside, initial support is seen at the 60-day EMA at 95.26, followed by the June 26 low at 94.15. With no clearly defined overhead technical barriers in the immediate dataset, any sustained advance above the recent close would likely be driven by momentum shifts, while a daily close back below 95.2616 would weaken the current constructive bias and expose a broader corrective phase.

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FX Weekly: Yen Returns to Losses, Dollar Under Pressure

Following a record intervention by the Japanese Ministry of Finance and the US Department of the Treasury, the yen strengthened by over 5%, recovering losses incurred over the last 5 months, since the outbreak of the war in Iran. After reaching a local low below the 156 level, the USDJPY pair has returned to growth.

Figure 1: Weekly Performance of Selected Currencies [vs. USD] (31.07 – 07.08)

Source: XTB Research, 10.08.2026

Japanese Yen (JPY)

The fundamentals have not changed significantly and continue to exert pressure on the Japanese currency. The key issue remains the carry trade, or trading on the interest rate differential. As long as the discrepancy between the projected interest rate levels in the United States and Japan remains significant, even interventions amounting to nearly 90 billion dollars may prove insufficient to permanently reverse the trend. Figure 2: USDJPY (31.10.2025 – 10.08.2026)

Source: xStation, 10.08.2026 Currently, the interest rate differential between both sides of the ocean stands at 2.675%. Market valuations suggest that it will narrow slightly in the coming months, reaching approximately 2.35% in July 2027. However, it seems that investors expect more decisive action from the Bank of Japan, with the next opportunity appearing only on 18 September. A decision to raise interest rates then could serve as a significant declaration for the market, leading to increased bets on subsequent hikes in the following months. Currently, such a move is priced at approximately 60%.

Figure 3: Bank of Japan Implied Policy Path (Hikes/Cuts) (2026-2027)

Source: XTB Research, 10.08.2026 In the meantime, the market’s attention will focus on the United States and the developing situation in the Middle East. Japan is almost entirely dependent on imports for its energy needs, and under standard conditions, nearly 90% of its crude oil comes from the Middle East. Figure 4: Japan’s Crude Oil Import Structure (2024)

Source: OEC, 10.08.2026 However, further interventions cannot be ruled out, which the markets seem to fear. Positioning on the yen has changed significantly after many investors withdrew speculative short positions for fear of further actions aimed at defending the exchange rate. Figure 5: Yen Positioning (2000 – 2026)

Source: XTB Research, 10.08.2026

US Dollar (USD)

The July NFP report has been published. The number of new jobs in the US economy fell by 23 thousand, missing expectations by 5 standard deviations. Although extreme phenomena occur much more frequently in the world of macroeconomics (the so-called fat tails), assuming the data follows a normal distribution, we would have to wait 290,000 years for another such reading. Figure 6: NFP and Employment Component in ISM PMI (2016 – 2026)

Source: XTB Research, 10.08.2026 The market reaction was certainly noticeable, though not as strong as many might have expected. The dollar’s losses were limited by, among other things, a decline in the unemployment rate (to 4.1%) and problems with seasonal adjustment of the data (the decline resulted mainly from a lower number of jobs in the public education sector). Figure 7: NFP and Unemployment Rate (1980 – 2026)

Source: XTB Research, 10.08.2026 It is worth noting, however, that higher energy prices have affected companies in the retail, leisure, and hospitality sectors (this despite the World Cup ending in July). Investors are currently unsure which direction the Fed will take in September; looking at market valuations, the chances of a hike can be compared to a coin toss. All eyes are on the July inflation reading scheduled for Wednesday. If, despite rising oil and gas prices, it shows similar values to June, we expect the committee led by Kevin Warsh to refrain from a hike until the next meeting. Figure 8: US CPI Inflation (2004 – 2026)

Source: XTB Research, 10.08.2026 For Warsh himself, this would be an exceptionally comfortable situation. In the event of intensifying inflation concerns, the committee would be almost forced to raise rates, especially in the face of revived discussions regarding the Fed’s independence. The topic returned to the table after further threats from Donald Trump directed at Lisa Cook, one of the FOMC decision-makers. These appeared more than a month after the Supreme Court deemed the president’s recent actions in this area unlawful.

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GBP clings to gains against US Dollar, US CPI in focus

  • The British Pound trades firmly at around 1.3500 against the US Dollar.
  • Investors await the US CPI data for July and the UK Q2 GDP data.
  • The Fed is not expected to raise interest rates in September anymore.

The British Pound (GBP) holds onto two-day gains marginally at around 1.3500 against the US Dollar (USD) during the Asian trading session on Tuesday. The GBP/USD pair remains firm as the British Pound outperforms despite financial markets pricing out the possibility of an interest rate hike by the Bank of England (BoE) in the near term.

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD0.08%-0.18%0.89%-0.14%0.08%0.12%0.29%
EUR-0.08%-0.27%0.79%-0.29%-0.06%-0.06%0.11%
GBP0.18%0.27%1.01%-0.03%0.21%0.23%0.36%
JPY-0.89%-0.79%-1.01%-0.71%-0.47%-0.59%-0.39%
CAD0.14%0.29%0.03%0.71%0.25%0.12%0.47%
AUD-0.08%0.06%-0.21%0.47%-0.25%0.00%0.14%
NZD-0.12%0.06%-0.23%0.59%-0.12%-0.00%0.15%
CHF-0.29%-0.11%-0.36%0.39%-0.47%-0.14%-0.15%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Strategists at Rabobank point out that “for the UK, the market is currently pricing in a reduced expectation of a rate hike by the end of the year,

This week, the major trigger for the British currency will be the preliminary United Kingdom (UK) Q2 and the June month Gross Domestic Product (GDP) data, which will be released on Thursday. In the April-June period, the UK economy is expected to have grown at a moderate pace of 0.4% vs. the previous reading of 0.6%. On a monthly basis, the GDP is seen contracting by 0.1%.

Meanwhile, the US Dollar Index (DXY) trades almost flat at press time, holding onto Monday’s recovery move at around 99.80. The USD Index is expected to remain sideways as investors await the United States (US) Consumer Price Index (CPI) data for July, which will be released on Wednesday.

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.” The data are due Wednesday and, in Haddad’s view, should confirm a gradual cooling in underlying price pressures rather than a renewed upswing.

The US inflation data will have a significant impact on the Federal Reserve’s (Fed) interest rate expectations, as the July monetary policy statement showed heightened concerns among policymakers toward upside inflation risks.

Lately, traders have priced out the possibility of a Fed interest rate hike in the September meeting after the release of weak US Nonfarm Payrolls (NFP) data for July.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3500, retaining a bullish near-term tone as spot holds above the 60-day exponential moving average (EMA) at 1.3403 and the broken downward resistance trend line now offering support around 1.3456. The Relative Strength Index (14) at 61.1 leans into positive territory, suggesting buyers remain in control while momentum is not yet stretched into overbought conditions.

On the downside, immediate support emerges at the former trend-line cap turned floor near 1.3456, followed by the 60-day EMA at 1.3403, where a deeper pullback would be expected to attract fresh demand. As long as GBP/USD defends these layers of underlying support, the pair would likely continue to favor the topside, with bulls eyeing further gains above the recent 1.3509 close in the sessions ahead.