Dollar gains momentum as oil soars on Middle East concerns

The dollar claws back recent losses as rising oil prices reignite inflation worries, while Middle East tensions boost commodities and risk metrics indicate greed.

Major currencies in focus

• The dollar strengthened, firming as rising oil prices re-ignited CPI jitters and pushed US Treasury yields higher. Fed official Hammack called for further rate hikes, saying policy is not restrictive enough. This is the turn yesterday's Asian session flagged — Middle East risk putting a floor under the dollar after the payrolls shock. Our own intraday gauge still ranks it last among the majors for a second day: the tape has turned, the ranking has not.
• The Japanese yen continued to give back gains from previous intervention efforts, with headlines suggesting intervention provided a price floor but failed to attract sustained buyers, leading to its decline.
• The euro's recovery against the dollar was reportedly limited by its 100-day simple moving average.
• The pound climbed around 0.2% to trade near 1.3520, as markets digested the Middle East headlines and looked ahead to US inflation. Domestically, Barclaycard spending rose 2.0% in July and consumer confidence hit a 21-month high.
• The Australian dollar rose without clear domestic catalysts, as the RBA is poised to maintain interest rates at 4.35% later today, with softer inflation cooling hike expectations.
• The New Zealand dollar fell as the US dollar firmed and oil prices stayed elevated — yet our intraday gauge now ranks the kiwi the strongest major, after it sat at the bottom of the table for most of last week. A session rally, and the sharpest reversal on the board.
• The Canadian dollar held near eight-week highs, benefiting from gains in oil prices. The Mexican peso's rally paused ahead of upcoming US inflation data, with a Citi Mexico survey forecasting Banxico to hold rates and USD/MXN to close 2026 at 17.90.
• Ukraine's central bank implemented its largest monetary liberalization since the 2022 invasion.

Commodities and market sentiment

• WTI crude oil surged over 6%, nearing $81.50, as the reopening of the Strait of Hormuz remained uncertain and US-Iran peace talks stalled. This extends yesterday's theme of Middle East risk supporting oil.
• Gold edged higher and pressed recent highs, with $4,400 still capping it — TD Securities points to CTA selling as the brake — while the Hormuz delay and the coming US inflation print kept buyers cautious. It is the thread that never left: gold led the tape last week and is still climbing alongside oil.
• Silver extended its rally, with XAG/USD targeting $69.
• Our proprietary market sentiment gauge (FSI) indicates "Greed" at 65, while the MRS stands at 64, and the CTS is high at 80.

Key events today

• AUD · Cash Rate · Forecast 4.35% vs. previous 4.35% (SCHEDULED)
• AUD · RBA Monetary Policy Statement · (SCHEDULED)
• AUD · RBA Rate Statement · (SCHEDULED)
• AUD · RBA Press Conference · (SCHEDULED)