USD: the Treasury, not the Fed, set the tone
The US dollar fell against every major currency in the week ending 21 August. The New Zealand dollar led with a 1.57% gain, followed by the Australian dollar at 1.33%, the euro at 1.01%, the Canadian dollar at 0.82% and sterling at 0.80%. The selling was concentrated on Wednesday, and it started with a fiscal announcement rather than a monetary one.
Treasury Secretary Scott Bessent said on 19 August that the department would at least double the size of its long-end liquidity support buybacks, from $2bn to $4bn per operation, across the 10- to 30-year sector between 9 September and 4 November. Ten- and thirty-year yields had touched twenty-year highs earlier in the week; the ten-year note closed more than five basis points lower at 4.647% and the long bond fell nine basis points to 5.196%. Gold rose more than 4% through $4,500 the same session, and the dollar weakened across the board. Traders read a Treasury willing to manage the long end as a reason to demand more compensation for holding dollars, not less.
The July FOMC minutes, released the same afternoon, were hawkish and were largely set aside. Three regional presidents — Hammack, Kashkari and Logan — dissented in favour of an immediate 25 basis point increase, many participants judged that tightening would likely be necessary if inflation did not decline, and some argued financial conditions were not yet restrictive enough to return inflation to 2%. Chair Warsh also floated moving to six scheduled meetings a year from 2027. Markets treated the record of a late-July meeting as backward-looking, given the 0.6% fall in July retail sales reported the previous Friday, and September hike odds settled near one in three against 50% a month earlier.
The dollar recovered part of the week's decline on Friday, when the flash S&P Global services index beat expectations and reminded the market that the US economy is not obviously slowing. Federal debt passing $40 trillion during the same week gave the buyback story a longer shadow than a technical debt-management change would normally cast.
Warsh's first Jackson Hole keynote as Fed Chair, on Friday morning, is the event. He has curtailed forward guidance at every opportunity since taking office on 22 May, shortened the post-meeting statement and answered evasively at both his press conferences, and he told reporters in July that his remarks would address long-term structural questions rather than near-term policy. The symposium theme — financial innovation and its implications for payments and policy — points the same way. A speech that says little about September would be read as a mild disappointment by dollar bulls; any acknowledgement that the hiking cycle is finished rather than paused would matter considerably more, and the market's expectation of neutrality is what gives either surprise its force.
Wednesday carries the substantive data. The second estimate of second-quarter GDP follows a preliminary 1.5%, and the core PCE deflator was running at 3.3% in June. A core reading that holds above 3% would restore some of the hawkish case the minutes made and support the dollar into the 16 September meeting; a step down would leave Warsh's silence looking like the end of the cycle. Consumer confidence on Tuesday, last at 90.8, is a secondary read on whether July's retail weakness has carried into August.
EUR: the strongest factory survey in four and a half years
The euro rose 1.01% against the US dollar over the week ending 21 August, trading around 1.1700 on Friday after touching 1.1711 and holding near a three-month high. Unlike most of the majors, the single currency had a domestic story to go with the dollar's decline.
S&P Global's flash August surveys, published on Friday, showed euro-area manufacturing at 52.8 from 51.9, the strongest reading in 54 months and comfortably above the 51.8 consensus. The composite index edged up to 52.1 from 52.0. Germany carried the improvement, with its factory index at 54.1 from 52.2, the best in 51 months, and export orders across the bloc rose for the first time since Russia's invasion of Ukraine in 2022. For an economy whose manufacturing base has been the drag on every recovery attempt since the energy shock, that is a change in kind rather than degree.
The European Central Bank raised its deposit rate 25 basis points to 2.25% in June, its first increase since 2023, and markets have a further quarter point at the 10 September meeting close to fully priced. Euro-area inflation returned to 2.9% in July with energy prices up around 10% on the year, so the Governing Council is being pushed by both the price data and the activity data in the same direction. That combination is doing more for the euro at present than the dollar's difficulties.
Against the Swiss franc the euro traded near yearly highs, with EUR/CHF around 0.9340, as investors sold the franc to fund positions elsewhere and the prospective rate gap between a hiking ECB and a Swiss National Bank frozen at zero widened.
The euro-area calendar is close to empty in the week to 28 August, which leaves the currency taking its direction from Washington. Warsh's Jackson Hole address on Friday and Wednesday's US core PCE print will determine whether the dollar's mid-August decline extends or reverses, and the euro's 1.01% weekly gain is more vulnerable to that than to anything from Frankfurt.
ECB speakers around the symposium are the exception worth watching. With a September increase close to fully priced, commentary that treats the flash PMIs as evidence the economy can absorb further tightening would push the euro toward the top of its recent range; any suggestion that the June move was a one-off adjustment rather than the start of a sequence would cost the currency more than the data flow currently justifies, precisely because so little doubt is priced.
GBP: inflation at a four-month high, spending going the other way
Sterling gained 0.80% against the US dollar in the week ending 21 August, the smallest advance among the majors. The pound traded near 1.3626 on Friday after reaching 1.3675 earlier in the session, its highest level since 11 February.
UK consumer price inflation accelerated to 2.9% in July from 2.6% in June, matching expectations and marking a four-month high, with core inflation broadly stable. Traders read the print as keeping a Bank of England increase in play, and money markets continue to price 25 basis points of tightening by the December meeting. The pound firmed on Wednesday alongside the broader move out of dollars.
The consumer data cut the other way on Friday. Retail sales volumes fell 0.5% in July after a 0.7% rise in June, itself revised down from 1.0%, partly unwinding a strong start to the summer. August's flash composite PMI reached a four-month high on the same morning, so the survey evidence and the hard spending data are telling different stories about the same quarter. Sterling eased into the close as US services activity beat forecasts and the dollar recovered part of its weekly loss.
For the Monetary Policy Committee, the combination is awkward in a familiar way. Inflation is moving away from target while household demand cools, and the December pricing rests on the assumption that the first of those matters more.
The UK calendar offers little in the week to 28 August, so the pound will trade on the dollar and on repricing of the December Bank of England move. With the currency at its highest since February, the risk is asymmetric: sterling has already absorbed a good deal of the hawkish case.
Wednesday's US core PCE and Warsh's Friday keynote are the two events capable of moving cable meaningfully. A soft core reading, following the 0.6% fall in July US retail sales, would extend the dollar's decline and put 1.3700 within reach; a firm print alongside a Fed Chair unwilling to close off a September increase would take sterling back toward the middle of its August range, where the retail sales weakness would get more attention than it received on Friday.
JPY: inflation accelerates again, and September comes into view
The yen firmed modestly against the US dollar over the week ending 21 August, but lagged the commodity currencies by a wide margin. USD/JPY traded between roughly 159.72 on 18 August and 158.12 on 19 August, and closed the week near 158.86. The currency has now given back about half the gains that followed the joint Tokyo–Washington intervention at the end of July.
Japan's national consumer price index rose 2.0% in the year to July, up from 1.6% in June, with core inflation excluding fresh food at 1.8% from 1.6%. That is a second consecutive acceleration and it lands with the Bank of Japan's policy rate at 1.00%. Governor Kazuo Ueda has indicated that normalisation could proceed at a faster pace, and markets are increasingly positioned for a move to 1.25% at the September meeting.
The yen's best session came on Thursday, when it gained close to 1% as US Treasury yields retreated on the buyback announcement. That is the mechanism that matters for this pair: with the Bank of Japan moving in quarter-point steps and the Fed on hold in the 3.50–3.75% range, the yield differential still dominates, and Japanese inflation data works on the exchange rate mainly through what it implies about the pace of the BoJ's exit.
Officials in Tokyo have gained some breathing room from the dollar's decline without having to act again. A currency near 159 remains uncomfortable, but it is a considerable distance from the levels that prompted the July operation.
Tokyo consumer price data for August arrives late on Thursday and is the week's live domestic release. Headline Tokyo inflation was last at 1.7% and the measure excluding food and energy at 1.9%. A print that pushes either measure higher would harden the case for a September increase and support the yen; a softer reading would leave the BoJ's timing genuinely open and put the currency back at the mercy of the US rates story.
That US story arrives on Wednesday and Friday. Core PCE at 3.3% in June leaves room for a firmer print to lift Treasury yields and take USD/JPY back toward 160, a level that would revive intervention talk. Warsh's Jackson Hole remarks carry the same risk in reverse: a Fed Chair who declines to defend the possibility of a September hike would compress the differential that has kept the yen weak all year.
CAD: a hot headline, a cooler core, and a firmer currency
The Canadian dollar rose 0.82% against its US counterpart in the week ending 21 August, with USD/CAD trading near 1.3850 and the loonie approaching a three-month high. Elevated crude prices and a broadly weaker greenback did most of the work.
Statistics Canada reported on Monday that consumer price inflation accelerated to 3.0% in the year to July, above the 2.9% consensus and up from 2.8%, driven by higher gasoline prices and travel tours. The Canadian dollar strengthened immediately, with USD/CAD falling roughly 0.2% on the day. Underneath the headline the picture was calmer: the Bank of Canada's core measures rose to 2.3% from 2.1%, and prices excluding food and energy edged up to 1.9% from 1.8%.
That gap between headline and core is the story for the Governing Council. Energy and services are lifting the top-line number while the trimmed and median measures continue to drift toward the 2% band, and the Council is weighing that against softer household consumption and elevated debt-servicing costs. Markets have pushed rate-cut expectations further out along the curve and expect the policy rate to stay at 2.25% on 2 September.
Crude provided the other support. Uncertainty over the reopening of the Strait of Hormuz has kept oil prices high through August, which improves Canada's terms of trade and gives the currency a cushion that has nothing to do with domestic monetary policy.
Second-quarter GDP on Friday is the week's substantive Canadian release. The economy managed 0.0% growth in the first quarter, or minus 0.1% on the year, after a 0.2% contraction in the fourth quarter of 2025. A positive quarterly figure would remove the growth argument that has been the main case for easing and would support the Canadian dollar into the 2 September decision; another flat or negative print would put the Bank's caution back at the centre of the pricing, and would matter more for the currency than July's inflation beat did.
The dollar leg and the oil price will decide the rest. Wednesday's US core PCE and Warsh's Friday keynote set the direction for the greenback, while any concrete progress on the Strait of Hormuz would remove a support that has flattered the Canadian dollar for most of August.
CHF: a funding currency again, with inflation near zero
The Swiss franc gained against the US dollar over the week ending 21 August, with USD/CHF trading around 0.8008 on Friday, but the move owed more to the dollar's decline than to anything Swiss. Over the past month the franc has appreciated around 1.7% against the greenback.
Swiss consumer price inflation slowed to 0.4% in July from 0.5% in June, a four-month low, and the Swiss National Bank's policy rate remains at 0.00%. Bloomberg's latest survey found that economists who had expected a Swiss increase during 2026 now see no tightening before June 2027, with most looking to early 2028. The SNB has also reiterated its preference for intervening in the foreign exchange market rather than allowing excessive appreciation.
Against the euro the franc did not behave as a haven at all. EUR/CHF traded near 0.9340 and close to yearly highs, as investors sold the franc to fund positions in higher-yielding currencies and the prospective gap between an ECB expected to raise rates on 10 September and an SNB anchored at zero continued to widen. Middle East tensions, including renewed doubts over the Strait of Hormuz, would ordinarily have supported the currency; this month they have not been enough to offset the rate differential.
The result is a franc that is strong where the dollar is weak and soft everywhere else. That is a different currency from the one that traded on risk sentiment through 2025, and it makes Swiss data close to irrelevant to the exchange rate for now.
The Swiss calendar carries nothing of consequence in the week to 28 August, so the franc will take its cues from the ECB pricing and from Washington. If Warsh's Friday keynote leaves the dollar softer, USD/CHF has room to extend below 0.8000; a firm US core PCE print on Wednesday would do the opposite and would meet little Swiss resistance given a central bank content to sit at zero.
The euro cross is where the more durable trend sits. With a 10 September ECB increase close to fully priced, EUR/CHF near yearly highs reflects a differential that has already been anticipated, and any wobble in that pricing would unwind the funding trade quickly. Traders should also keep the SNB's intervention preference in view: a rapid appreciation, most likely triggered by an escalation in the Gulf, is the one development capable of putting the Bank back in the market.
NZD: the best of the majors, with a central bank still raising rates
The New Zealand dollar led every major currency in the week ending 21 August, gaining 1.57% against the US dollar to trade around 0.5965 by Friday, its highest level since early June. That still leaves the kiwi inside a narrow 2026 range of 0.5625 to 0.6090, which is a reminder of how compressed currency volatility has been this year.
Two things drove the move. The greenback fell broadly after the US Treasury announced its expanded bond buyback programme on Wednesday, and the New Zealand dollar carries the most attractive rate outlook of the pro-cyclical currencies. The Reserve Bank of New Zealand raised the Official Cash Rate 25 basis points to 2.50% in July, its first increase in more than three years, after holding since November 2025.
The Bank moved because inflation has run well above the band. Annual headline inflation is expected to have peaked at 3.9% in the June quarter before easing to 3.3% in the September quarter, and the RBNZ has warned that the lingering effects of the Gulf supply shock leave the medium-term outlook uncertain even after the partial reopening of the Strait of Hormuz. ANZ economists expect further increases in early September and late October, which would take the cash rate to 3%.
Softer Chinese activity data mid-week, which would ordinarily weigh on the kiwi through the trade channel, was comfortably absorbed. When the dollar is the story and the domestic central bank is the only one in the group still tightening, that is what tends to happen.
The Reserve Bank's Monetary Policy Statement falls on 2 September, just outside the coming week, so the days to 28 August are about positioning into it. With markets already leaning toward a quarter-point increase, commentary or partial-indicator data that firms that expectation would extend the kiwi's advance; any sign that the September quarter inflation moderation is arriving faster than the Bank forecast would leave a currency that has just gained 1.57% looking stretched.
The US calendar will decide the rest. Core PCE on Wednesday and Warsh's Jackson Hole keynote on Friday are the two events with the capacity to reverse the dollar's mid-August decline, and the New Zealand dollar has the most to lose from that reversal precisely because it gained the most from the move. Chinese data flow remains the quieter risk, and one the market has been willing to overlook for several weeks now.