The US dollar traded near familiar levels after July’s American inflation figures matched consensus on 12 August, with headline annual CPI easing to 3.4% and core inflation at 2.5%. The report generated limited volatility, partly because mid-August trading is seasonally thin. With weaker nonfarm payrolls and two consecutive months of softer inflation, hawkish Federal Reserve expectations have faded; CME FedWatch pricing shows only a 35% chance of a September rate hike, down from 55% a week earlier, and a majority expects another hold on 16 September.
By Friday, the US Dollar Index was slightly lower around 99.82 but remained on track for a weekly gain. Thursday’s producer price report showed July wholesale prices were flat, reinforcing the view that Fed tightening may be less urgent. However, dollar losses were limited by a sharp rise in oil prices. Brent crude pushed toward $88 per barrel and WTI to about $84, with both on course for weekly gains near 4%, after US Defense Secretary Pete Hegseth said the military could sustain an indefinite naval blockade of Iranian ports. Disruption through the Strait of Hormuz has kept supply fears in play.
Treasury yields also climbed, with the 30-year auction producing the highest yield since 2001 at 5.228% and the 10-year yield reaching 4.659%, reflecting fiscal concerns. The Japanese yen traded near 159.20 per dollar and headed for a 1% weekly loss despite earlier US-Japan intervention; traders are watching the 160 level for possible fresh action. Sterling hovered below $1.35, while the Australian dollar tested the 100-day simple moving average around 70.6 US cents after the RBA signalled readiness to hike further if needed.
For crypto markets, the mix of reduced Fed rate-hike bets, firmer oil prices and rising yields creates a neutral-to-mixed macro backdrop. Lower rate expectations can support risk assets, but oil-driven inflation concerns and a resilient dollar are likely to limit a strong directional impulse until clearer monetary policy signals emerge.
