Dollar drives euro to three-month low as gold rebounds 1.3%

The dollar rose against most majors on Tuesday, taking the euro below its June low and the Australian dollar below 0.70 after the RBA's hike, even as US consumer confidence fell far short of forecasts. Gold went the other way, rebounding 1.3% as oil slid to its lowest in about a week.

The dollar, yields and the Fed

• The Conference Board's consumer confidence index fell to 81.9 against 89.2 expected, through the pandemic and Liberation Day lows near 85, investingLive noted. JOLTS job openings came in at 7.079 million against 7.225 million expected. FXStreet noted that the dollar kept rising even though confidence deteriorated, and put its gains down to the persistent advance in Treasury yields.
• The ten-year Treasury yield eased at midday from the 5.24% area it tested on Monday, according to Action Forex, but the long end sold off again and took the 30-year yield to its highest since 2002, according to investingLive's US wrap.
• Fed Governor Michael Barr said "there is a need to recalibrate policy" and that the base case is that "further policy adjustments" are likely needed, according to FXStreet.
• USD/CHF rose for a fifth straight day, FXStreet reported, peaking at 0.8359 on our feed in the US afternoon, a fresh 16-month high, and closing at 0.8339.

The euro, sterling and the Canadian dollar

• EUR/USD broke below 1.1325, the June low that Société Générale had flagged as support, touching 1.1312 on our feed before closing at 1.1341, down 0.26%. ING said Monday's comments from ECB President Christine Lagarde had tempered expectations of an October hike, and the euro fell even though Spain's September inflation came in at 4.9% against 4.6% expected, its highest since February 2023 according to investingLive.
• The pound fell to 1.3202 on our feed before closing at 1.3231, down 0.18%.
• Canada's GDP was flat in July, as expected, with an early estimate pointing to a 0.2% rebound in August. USD/CAD closed 0.11% higher at 1.4190.

The Australian dollar and the RBA

• The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60% in a unanimous decision, as expected. AUD/USD rose to 0.7029 on our feed at the announcement, then fell below 0.70 after Governor Michele Bullock said policymakers had considered holding because of housing and global risks, according to ING. Action Forex reported that she described further tightening as merely a "hope", not the base case. The pair closed at 0.6986, down 0.45%.
• TD Securities called it a risk-management hike and expects no further RBA hikes in 2026, while a note carried by Action Forex now sees a follow-up in November as the base case.
• The New Zealand dollar fell to a three-month low against the dollar, according to FXStreet, and closed 0.45% lower on our feed.

The yen

• USD/JPY barely moved, ranging between 156.98 and 157.72 on our feed and closing at 157.28. Japan's Finance Minister Satsuki Katayama said an undervalued yen is problematic and that she had agreed with US Treasury Secretary Scott Bessent to strengthen cooperation.
• The session high stayed well short of last Thursday's 159.02, the level our weekly wrap is watching.

Gold, silver and oil

• Brent was near $107 a barrel at the start of European trading, according to ING, then slid to around $103, its lowest in about a week, according to Action Forex, which pointed to resumed flows through Saudi Arabia's East-West pipeline. Iran's Foreign Minister Abbas Araghchi said on Monday that Tehran had discussed with Qatari mediators proposals to be put to Washington.
• Gold rebounded 1.3% on our feed, from Monday's close of $4,123 to a close of $4,177, at its session high, after dipping to $4,108 at the reopen, even as the 30-year yield hit its highest since 2002. FXStreet tied the rise to the oil slide easing inflation worries, despite hawkish comments from Fed officials, the reverse of the usual link between a hawkish Fed and gold.
• Silver rose 1% on our feed, closing at $61.44.

Market gauges and what's next

Our proprietary metrics at the close of the session:

• Readings: an MRS of 69, a CTS of 71, and an FSI indicating Greed at 64.
• Top of our strength table: the New Zealand dollar, on top for 318 of the session's 1,440 minutes (22%), on a day it fell to a three-month low against the dollar.
• Bottom: the yen, in last place for 23% of the minutes.
• The dollar: narrowly third, on top for 185 minutes, after sitting seventh or eighth in each of the previous four sessions. The Swiss franc, top of the table on Friday and Monday, dropped to sixth. For the kiwi and the dollar alike, the table counts the minutes each currency spends in first place, not how far it moved.

Still ahead today: in the US, the ADP employment report at 12:15 UTC (forecast 73,000) and the core PCE price index at 12:30 UTC (forecast 0.3% month on month), alongside the final second-quarter GDP.