Markets grapple with intervention, ISM, and geopolitical risks

Yen surges on confirmed joint intervention, while the dollar sees mixed signals and commodities face pressure from US-Iran tensions.

Major currency moves

• The Japanese yen strengthened significantly, reaching three-month highs, after the US and Japan confirmed a joint intervention.
• The US dollar experienced mixed movements. It slowed losses after the yen intervention and was barely changed, yet it later rebounded towards 100 on strong US ISM data. This robust data clouded the Federal Reserve's future policy trajectory, with Fed's Warsh also weighing reducing FOMC meetings.
• Our intraday strength gauge ranks the dollar as the weakest major, indicating a session pullback despite the broader rebound narrative from economic data. The Swiss franc is the strongest currency for the session.
• The Australian dollar fell to 0.70 on the strong US ISM print, but later firmed as robust Australian job ads and resurgent inflation revived hawkish RBA bets. The Mexican peso notably outperformed the general US dollar strength ahead of Banxico's upcoming rate decision.
• Traders are awaiting New Zealand employment data later today, including the Employment Change q/q (forecast 0.1% vs previous 0.2%) and Unemployment Rate (forecast 5.4% vs previous 5.3%).

Commodity outlook

• Gold fell near $4,050, remaining depressed above $4,000. This decline was attributed to uncertainty in US-Iran talks and the dollar's rebound.
• Oil prices plummeted amid talks with Iran, although fears were somewhat eased by the yen intervention. Iran reportedly rejected any second corridor through the Strait of Hormuz, with President Trump stating this is "a last chance" for Iran.

Key economic insights

• Our proprietary metrics show an MRS of 62, indicating a moderately ready market. The CTS remains high at 80, while the FSI stands at 58 (Neutral).
• South Korea's core CPI for July reached a two-and-a-half-year high, showing the largest annual increase since December 2023.
• In upcoming US data, traders await JOLTS Job Openings (forecast 7.44M vs previous 7.59M).