Market Pulse: Fed Bets & Geopolitical Shocks Drive Volatility

The Dollar faces mixed signals from inflation data and rate bets, while geopolitical incidents in the Strait of Hormuz fuel oil price gains and safe-haven flows.

USD: A Two-Way Session

The US Dollar traded both ways today. It opened firm, with the hawkish-Fed narrative from this week's solid US data — including the latest PCE inflation print — keeping rate-hike bets alive. That early strength pushed the Euro toward a 13-month low near 1.1350, drove Gold below $4,050, and weighed on the New Zealand Dollar (below 0.5650) and the Australian Dollar (near 0.6900).

The rally faded as the session wore on. Headlines noted the data wasn't "hot enough" to extend the move, and per Investing a softer secondary inflation read cooled some of the hike nervousness, pulling the Dollar off its highs.

A geopolitical bid cushioned the pullback. According to the headlines, an attack on a cargo ship near Oman prompted the UN's IMO to pause its Strait of Hormuz evacuation plan — a development that lent the Dollar safe-haven support and tempered its data-driven slide.

Major Currencies React

• Pound Sterling bulls appeared hesitant, buckling amid a leadership vacuum and the USD's safe-haven appeal from the Hormuz incident.
• The Japanese Yen consolidated near its 40-year low against the Dollar after Tokyo's headline CPI for June came in at 1.7% year-over-year, matching forecasts (previous 1.4%). Core CPI also matched expectations at 1.6% (previous 1.3%). Intervention risks remain a concern for the JPY.
• The Canadian Dollar gained ground as WTI crude oil prices rose.
• The Mexican Peso advanced following Banxico's hawkish policy hold, fueling a rally.
• Our intraday strength gauge positions the Australian Dollar as the strongest currency. This comes even as headlines indicate it fell earlier to near 0.6900 on Fed hike bets and struggled to rally despite positive data.
• The Swiss Franc ranks as the weakest currency on an intraday basis, per our metrics.
• The People's Bank of China set the USD/CNY reference rate at 6.8166, down from the previous 6.8209.

Commodities and Carry Trade

Crude Oil, including WTI, maintained gains near $71.50 after the ship collision near Oman. However, FXStreet notes that crude "bounces on a Hormuz scare it doesn't believe," suggesting underlying skepticism regarding the sustainability of the rally despite immediate geopolitical fears. Silver also "catches a bid" according to headlines.

Our proprietary Market Readiness Score (MRS) stands at 56, while the Carry Trade Score (CTS) is elevated at 82.

Key Events Today

• USD · Revised UoM Consumer Sentiment: SCHEDULED — forecast 50 vs previous 48.9
• USD · Revised UoM Inflation Expectations: SCHEDULED — forecast n/a vs previous 4.6%