USD: payrolls turn negative and the tightening debate goes quiet
The US dollar spent most of the week trading just under 100 on the dollar index before Friday's employment report took it lower. The index eased in the hours after the release. That single number did more to the currency than the four preceding sessions combined, and it left the greenback softer against most of the majors into the weekend.
The July payrolls figure was the week's genuine surprise. Employers cut 23,000 positions against a consensus of roughly 80,000 to 95,000, the first outright decline in months. Government employment fell by 53,000 and private payrolls still rose by 30,000, so the headline overstates the deterioration in the business sector. Retail, leisure and hospitality were soft, and healthcare grew more slowly than it has been.
The household survey pointed the other way, at least on the surface. The unemployment rate edged down to 4.1 per cent, though the improvement came mostly from people leaving the workforce rather than finding jobs. Average hourly earnings told the clearer story: the twelve-month increase slipped to 3.2 per cent, the slowest since May 2021. Wage growth at that pace removes one of the arguments for further Federal Reserve tightening.
Money markets still carry a Federal Reserve increase in 2026, but not before December. That pricing is the axis the US dollar now turns on. A labour market that is cooling without breaking gives the Committee room to wait, and a currency whose central bank is waiting takes its cues from the inflation data instead.
Wednesday's CPI report is the week's decisive release for the US dollar and, by extension, for most of the majors. A firm core print would push the December pricing forward and lift the greenback across the board; a soft one would follow Friday's payrolls in the same direction and leave the dollar index below where it started the week. The rest of the calendar sits in that shadow.
Thursday brings producer prices and Friday brings retail sales alongside the University of Michigan consumer sentiment index. Retail sales carry more weight than usual after a payrolls report that questioned the strength of household income. A solid consumer print would blunt the argument that July's job losses mark a turn; a weak one would compound it.
Two data points now define the near-term US dollar: whether inflation is still falling, and whether the consumer is still spending. This week produces both.
EUR: cheaper energy does the work the ECB has not
The euro traded around $1.154 through the back half of the week, close to a seven-week high against the US dollar. Falling oil prices were the driver. Brent dropped sharply on 4 August on hopes of renewed US-Iran diplomacy over the Strait of Hormuz, compounded by a further OPEC+ output increase, and crude finished the week down about 10 per cent. For a bloc that imports most of its energy, that is a direct improvement in the terms of trade.
The inflation arithmetic complicates the picture. Euro area annual inflation is estimated at 2.9 per cent for July, up from 2.8 per cent in June, so the immediate data still points above target even as the forward-looking energy input improves. The European Central Bank left all three policy rates unchanged at its 22-23 July meeting, holding the deposit facility at 2.25 per cent, the main refinancing rate at 2.40 per cent and the marginal lending facility at 2.65 per cent. Markets fully price one further increase by year-end and put roughly a 40 per cent chance on a second.
Friday's US payrolls report added a second, external leg to the move. With US employers shedding 23,000 jobs in July and the dollar index easing, the euro benefited without needing any domestic news of its own. Much of the single currency's strength this week was borrowed rather than earned.
That is the tension worth naming. The euro's best support — cheaper energy — is the same development that will lower euro area inflation and shorten the tightening path the market is pricing. A currency can hold onto one of those for a while. Holding both is harder.
Germany's final harmonised CPI lands on Wednesday, hours before US CPI. The German number rarely surprises at the final estimate, so the euro's Wednesday is really a dollar event: a firm US core reading would narrow the rate differential in the greenback's favour and pull the pair back below $1.15, while a soft print would extend the move toward the recent high.
Energy stays the second variable, and it is not on a schedule. Concrete progress on reopening the Strait of Hormuz would keep crude falling and support the euro through the terms-of-trade channel; a breakdown in the talks would reverse that quickly, and the euro would give back the cleanest part of its recent improvement. European Central Bank speakers through the week may test how much of the year-end tightening pricing survives a lower oil path.
GBP: three dissents, a Governor's caution, and a GDP print to settle it
Sterling rose above $1.345 on 6 August, supported by improving global risk appetite rather than by anything new from London. The pound has been trading on the read-through from the Bank of England's 30 July meeting for more than a week now. That decision was more contested than the outcome suggested.
The Monetary Policy Committee held Bank Rate at 3.75 per cent on a 6-3 vote, with the three dissenters favouring an increase rather than a cut. A split of that size on the hawkish side is unusual, and sterling initially firmed on it. Governor Andrew Bailey then spent the press conference playing the vote down, arguing the disinflation process remains on track despite external uncertainties. The pound gave back part of its move on his remarks.
Friday's US employment report gave sterling a second lift. With US payrolls down 23,000 in July and the greenback easing, the pound ended the week firmer against the dollar without a domestic catalyst. Against the euro it was a quieter week, the single currency drawing its own support from a roughly 10 per cent fall in crude prices.
The unresolved question is whether the three dissents represent a genuine minority view or the leading edge of one. Nothing in the past week has settled it, and the Governor has made clear he is not inclined to. That leaves the data to do the arguing.
Thursday carries the week's substance for sterling: preliminary second-quarter GDP, alongside June industrial and manufacturing production and the June trade figures. A growth print that beats expectations would strengthen the dissenters' case and support the pound into the September meeting; a weak one would validate the Governor's caution and take the hawkish pricing out of the currency.
US CPI on Wednesday sets the backdrop. Sterling has spent the past fortnight taking direction from the US dollar rather than from UK fundamentals, and a firm American inflation print would likely override Thursday's domestic release in the pair. The cleaner expression of any UK growth surprise may be against the euro rather than the dollar.
JPY: the intervention holds, but only for three sessions
The yen was among the weaker major currencies this week, and the reason is what did not happen rather than what did. Tokyo and Washington intervened jointly on 30 July, a rare co-ordinated action that pushed the US dollar sharply lower against the yen. USD/JPY traded up around 160 in the days immediately after, then eased to roughly the mid-156 area by 3 August. No follow-up operation came, and the pair worked its way back above 157 as the week wore on.
That pattern is familiar to anyone who has watched intervention episodes. The initial move is large and the durability depends on whether officials return. By Friday the yen had weakened back past 158 at one point, which itself revived speculation that authorities may step in again. Japanese officials have not commented on their intentions since the operation.
The medium-term arithmetic still favours a weaker yen. The currency has strengthened about 3.1 per cent over the past month on the back of the intervention, but it remains roughly 6.7 per cent lower than it was twelve months ago. Interest-rate differentials between the Federal Reserve and the Bank of Japan continue to do most of the work, and Friday's weak US payrolls narrowed that gap without closing it.
The tension here is unusually explicit. Officials have demonstrated they will act on the level, while the rate structure keeps pushing that level the other way. Neither side has changed its position, so the market is left testing how far it can move before the next operation.
The Bank of Japan's Summary of Opinions arrives Monday at 9:50am alongside the current account figures. The Summary is the closest thing to a policy signal on the calendar this week, and traders will read it for how seriously board members treat currency weakness as an inflation problem. Members framing the yen as a policy consideration would support the currency; a discussion focused only on domestic demand would leave it exposed to the differential again.
US CPI on Wednesday is the larger event for the pair. A firm American inflation print would widen the rate gap and push USD/JPY back toward the levels that prompted the July operation; a soft one takes pressure off the yen without requiring any action from Tokyo.
Intervention risk sits over both scenarios. It is not a scheduled event, and its timing has historically followed the pace of the move rather than any particular level.
CAD: 75,000 jobs against a 10 per cent fall in crude
The Canadian dollar traded near 1.40 against the US dollar on Friday, with the pair holding a narrow band between roughly 1.4008 and 1.4029 through the session. That calm sat on top of two large and opposing developments. Canada's labour market delivered its strongest month in some time, while the commodity that usually underwrites the currency fell hard.
Statistics Canada reported 75,000 jobs added in July against a Reuters consensus of 15,000, and the unemployment rate fell to 6.4 per cent, its lowest in two years. Ontario accounted for 52,000 of the increase and British Columbia added 18,000. Hiring was broad rather than concentrated, with wholesale and retail trade up 21,000, finance and real estate up 18,000, and construction up 16,000. Average hourly wages rose 2.8 per cent from a year earlier to $37.17.
Oil moved the other way. Brent fell sharply on 4 August as markets priced the prospect of renewed US-Iran diplomacy over the Strait of Hormuz, and a further OPEC+ output increase added to the decline. Crude ended the week down about 10 per cent. For the Canadian dollar that removes one of its standing supports at exactly the moment domestic data is at its strongest.
Friday's US payrolls report resolved the standoff in the Canadian dollar's favour, at least for a session. A 23,000 decline in US employment against a 75,000 increase in Canada is a wide divergence for two economies that usually move together. Whether the Canadian dollar keeps the benefit depends more on the oil path than on the next domestic print.
Canada's own calendar is thin this week, which leaves the loonie trading US data and crude. Wednesday's US CPI is the primary event: a firm core reading would lift the US dollar broadly and push the pair back above 1.40, while a soft print would let last Friday's labour-market divergence carry further.
Oil is the second and less predictable variable. Confirmation that US-Iran talks are progressing would keep crude falling and weigh on the Canadian dollar even against a softer greenback; any breakdown would reverse a sharp move quickly and give the currency back a support it lost within a single session. OPEC+ commentary on the latest output increase matters here too.
US retail sales on Friday close the week. A strong consumer print would reinforce the demand side of the oil equation and help the Canadian dollar through a channel that has been working against it.
CHF: the haven premium deflates as the Middle East calms
The Swiss franc has been the weakest of the major currencies this quarter, and this week did nothing to change that. USD/CHF traded near 0.8130 and EUR/CHF steadied around 0.9300 in early August. The franc's problem is not Swiss — it is that the conditions which normally support it have been unwinding since late July.
Geopolitical de-escalation in the Middle East since 27 July has deflated the haven premium the currency carried through the first half of the year. Markets spent this week pricing the prospect of a US-Iran agreement over the Strait of Hormuz, with crude falling roughly 10 per cent as a result. Every step towards that outcome removes a reason to hold francs. The move has not been linear: doubts about the reopening surfaced mid-week and briefly restored some defensive demand, mostly to the US dollar rather than to the franc.
Swiss inflation gives the currency no support from the policy side. July CPI came in at 0.4 per cent year on year with core at 0.3 per cent, and the Swiss National Bank's policy rate remains at zero. Euro area inflation is running at 2.9 per cent over the same period. A gap of that width between Swiss and euro area price growth is the clearest argument for a softer franc against the single currency.
The structural case has not gone away. Switzerland's current account position and the franc's long-run real appreciation are unchanged by three weeks of diplomacy. What has changed is the cyclical overlay, and the cyclical overlay is what trades.
Switzerland publishes little of consequence this week, so the franc takes its direction entirely from outside. Wednesday's US CPI is the main scheduled event: a firm print would lift the US dollar against the franc and extend the quarter's pattern, while a soft one would give the currency some relief without addressing the reason it has been soft.
The Middle East file is the more consequential variable and it does not sit on the calendar. Concrete progress on reopening the Strait of Hormuz would continue to drain the haven premium and leave the franc weaker still, particularly against the euro. A visible setback would restore some of that premium quickly, though this week suggested the first call on defensive flows currently goes to the US dollar rather than to the franc.
NZD: unemployment at an eleven-year high, and a September hike still priced
The New Zealand dollar traded around 0.5890 in early August, after falling to about 0.586 on a second-quarter labour report that came in worse than forecast. The currency then recovered on Friday as weak US employment data weighed on the greenback. Over the week the kiwi finished in better shape than its domestic data alone would justify.
The labour figures were the local event. Unemployment climbed to 5.6 per cent in the second quarter against expectations of 5.4 per cent, the highest reading since the third quarter of 2015. Employment itself rose 0.5 per cent on the quarter and beat forecasts of 0.1 per cent, so the increase in the jobless rate reflects a sharp rise in the labour force rather than an outright loss of jobs. That distinction matters for how the Reserve Bank reads it.
Markets kept pricing a quarter-point increase in September regardless. The Reserve Bank of New Zealand signalled at its most recent meeting that further tightening may be needed, and this week's report reinforced the case that any further increases would be gradual rather than aggressive. A hawkish central bank remains the kiwi's main support.
The tension is that a rising unemployment rate and a hiking central bank are difficult to hold together for long. One of them will give. This week the market chose to believe the Reserve Bank, helped by a US payrolls report that made the comparison flattering.
Thursday brings the Reserve Bank's survey of inflation expectations, the week's only domestic release of substance. Expectations that hold near current levels would keep the September increase priced and support the New Zealand dollar; a decline would give the doves on the Committee something to work with and take the kiwi's main prop away.
US CPI on Wednesday is the larger driver, as it is for most of the smaller majors. A firm American inflation print would push the New Zealand dollar back toward 0.586 and undo Friday's recovery, while a soft one would let the currency build on it. China's credit data on Thursday is a secondary input, though a weak reading would raise questions about the demand backdrop that the kiwi shares with the Australian dollar.
With the domestic story now pointing both ways at once, the New Zealand dollar is likely to trade the US calendar this week and revisit its own in September.