Dollar Slips, Fed Cut Bets Drive Global Markets (18 – 22 August)

The dollar index slipped 0.3% to 97.85, while gold fell near $3,340 on reduced Fed cut bets. Brent crude dropped 1.5% to $65.80 on weak China data and OPEC+ supply. Bond yields climbed, with the US 10-year at 4.3% and Japan’s JGB above 1.56% after strong GDP. In Europe, the ECB ended its easing cycle as Eurozone GDP rose 0.1%; UK gilt yields hit 4.60% after GDP beat forecasts.

Market Drivers and Catalysts

Currencies: Dollar weaker on Fed cut bets; GBP, EUR rise; JPY firms on stronger GDP

Commodities: Gold weakens on PPI shock; crude pressured by China and OPEC+

Fixed Income: US and Japan yields rise; ECB ends easing; UK gilts up on data

Macro events: Jackson Hole, Trump–Putin meeting in focus

Macro headlines: Mixed global growth signals; central banks weigh inflation and tariffs

The US dollar index slipped 0.3% to 97.85 for the week, as July retail sales rose 0.5% and import prices climbed 0.4%, adding to inflation fears after a hotter than expected PPI. Meanwhile, gold hovered near $3,340, poised for its worst week since June, as markets scaled back expectations for a 50 bps Fed cut. Traders now expect two 25 bps cuts by October.

Brent crude fell 1.5% to $65.80, hurt by weak Chinese data, growing OPEC+ supply, and uncertainty ahead of the Trump–Putin meeting in Alaska. Forecasts from major agencies signal a crude surplus lasting through mid-2026.

The US 10-year Treasury yield rose slightly to 4.3%, up from 4.2%, amid resilient retail data and higher import costs, which tempered hopes for multiple rate cuts. Japan’s 10-year JGB yield climbed for a fifth straight day above 1.56%, as stronger GDP added pressure on the BoJ to pivot, although Governor Ueda remains cautious with inflation still under 2%.

In Europe, the ECB ended its easing cycle after eight cuts, while Germany’s 10-year bund yield stayed near 2.6%. Eurozone GDP rose 0.1% in Q2 and inflation held at 2.0%. In the UK, stronger GDP data sent 10-year gilt yields to 4.60%, while unemployment stayed at 4.7% and wage growth slowed to 4.8%.

Macro Calendar Highlights (Times in GMT)

• Jackson Hole Economic Symposium
• US Existing Home Sales, Initial Jobless Claims
• Germany Flash PMIs
• UK Retail Sales
• Japan CPI (Jul)

Fixed Income

US yields rose slightly as markets adjusted to firm retail sales and import price data. The 10-year yield reached 4.3%, while auction demand weakened amid growing tariff risks and deficit concerns. In Japan, JGB yields extended gains to above 1.56% as GDP beat expectations, heightening rate hike speculation.

Germany’s bund yield hovered near 2.6%, with markets digesting ECB’s end to its easing cycle. The UK’s 10-year gilt yield increased to 4.60% following upbeat GDP and labor data, even as wage growth slowed and unemployment remained steady.

Commodities

Gold traded near $3,340, heading for its worst weekly performance since late June, pressured by a sharp rise in US PPI, which reduced expectations for aggressive Fed cuts. Fed members signaled support for smaller, gradual easing steps.

Brent crude slipped 1.5% to $65.80, as weak economic data from China, rising OPEC+ output, and a cautious outlook ahead of US–Russia talks weighed on sentiment. Markets await further clarity at Jackson Hole and Alaska’s summit.

Silver remained below $38, losing 1% on the day, following labor data that reinforced Fed caution. Jobless claims fell to 224,000, and traders dialed back odds of a 50 bps rate cut.

Currencies

The US dollar declined for the week, pressured by stronger-than-expected July retail sales and import prices, which stoked inflation concerns. Market focus shifts to the Trump–Putin meeting and the Jackson Hole symposium.

The euro held near $1.16, as the ECB wrapped up its easing cycle and Eurozone GDP posted a modest 0.1% gain. Inflation remained at 2%, while geopolitical risk added caution.

The Japanese yen strengthened toward 147 on robust Q2 GDP data, with net exports contributing 0.3 percentage points. Rate hike speculation grew, though Governor Ueda remains cautious amid sub-2% inflation.

The British pound rose to $1.36, marking a five-week high, after GDP expanded by 0.3% in Q2, beating expectations. Labor market data was mixed, but overall strength reduced the likelihood of further near-term BoE cuts.