25 August 2026

USD gained across G10 and the Fed hike tail rose 4.29pp to 43.93%, but Chicago Fed activity slipped below zero and TGA-funded buyback discussion briefly weakened the currency. Iran sanctions provide haven and inflation upside; softer long yields and fiscal-credibility concern oppose it.

MUFG Bank describes the roughly 2.5% four-week Dollar decline as a renewed debasement phase linked to joint FX intervention and the Treasury buyback surprise. ING sees DXY consolidating in the 98.50–99.00 area with downside risk, although Warsh creates a hawkish event tail; Natixis likewise places the index near a three-month low. The medium-term disagreement is important: Danske Bank remains USD-constructive and projects EUR/USD at 1.12 in 12 months, while Credit Agricole CIB calls USD undervalued against EUR and NZD but notes it is already the largest G10 long. On the fiscal channel, Spectra Markets assigns a 50% base case that buybacks prove largely irrelevant, but warns a 10-year yield break above 4.75% could revive volatility; UniCredit argues the programme is too small relative to the Treasury market without genuine fiscal repair. World Gold Council adds a technical warning: the broad Dollar index has broken its post-November uptrend, leaving the May low as the next support zone.

EUR softened only marginally around 1.1600 without fresh data. ECB hike probability eased 1.64pp but remains dominant at 93.92%; higher energy and Bund yields support tightening while also worsening the terms of trade.

ING keeps a constructive near-term path, targeting EUR/USD at 1.17 by end-September and 1.18 at year-end, with 1.1660/70 identified as support and speculative positioning still judged underweight. Natixis supports that short-horizon case with a 52.1 composite PMI, 52.8 manufacturing PMI and aggressive September ECB pricing, while also warning that Bund yields and peripheral spreads are elevated. Danske Bank agrees that one final 25bp September hike is likely, but its horizon changes the conclusion: weaker relative growth, high energy costs and eventual policy divergence produce a 1.12 EUR/USD forecast in 12 months. Credit Agricole CIB calculates fair value near 1.1539 and an overvaluation z-score of 1.74, still below its 2-SD signal threshold, so it does not yet recommend a clean short. MUFG Bank adds that one-month risk reversals have moved in favour of EUR calls for the first time since the Middle East conflict began. The combined view is therefore near-term constructive but explicitly vulnerable on the medium-term growth and energy horizon.

GBP drifted lower without a domestic release and BoE hold probability rose to 79.36%. The current UK mix remains softer labour and externally driven inflation rather than a clean growth story.

Standard Chartered argues that the move above 1.36 was primarily a USD-weakness trade rather than evidence of a stronger UK cycle. Its caution rests on unemployment at 4.9%, vacancies at their lowest since 2021 and private-sector wage growth slowing to 2.8% y/y, while headline CPI rose to 2.9% mainly through energy; it therefore favours locking in part of long-GBP gains and sees consolidation risk toward 1.35. Credit Agricole CIB reaches a similar tactical conclusion from positioning, classifying GBP as overbought and entering short GBP/USD with a +4% target and -2% stop framework. Westpac Economics provides the more balanced data read: manufacturing PMI at 51.5 and services at 52.8 remain expansionary, GfK confidence improved to -14, but July retail sales still fell 0.5%. Institutions therefore agree that Sterling has carry and positioning support, but disagree on whether that is enough to overcome weakening labour demand and a higher BoE hold probability.

AUD had no fresh realised print ahead of today’s RBA Minutes. Hold probability rose 2.51pp to 86.00%, while China/trade risk weighs; however, strong COT and extreme retail shorts keep the currency from a bearish classification.

MUFG Bank retains a specific long AUD/JPY position opened at 111.20 with a 114.50 target and 109.20 stop, arguing that record copper, prospective China fiscal support and AI-capex-related commodity demand outweigh the weak employment report. Westpac Economics confirms the tension: unemployment rose to 4.5% and employment fell, yet AUD still outperformed and Australian 10-year yields remained elevated. Wells Fargo Economics treats CPI as the decisive policy test, saying another RBA hike remains possible if headline and trimmed-mean inflation stay firm. Danske Bank is more cautious beyond the immediate horizon: declining odds of further tightening, weak Chinese growth and a potentially hawkish Fed lead it to project AUD/USD down toward 0.68 in 12 months. Credit Agricole CIB places model fair value near 0.7127 versus spot around 0.7171, implying only modest overvaluation rather than a decisive sell signal. World Gold Council likewise identifies trimmed-mean CPI, not the volatile headline alone, as the key confirmation. The institutional stack supports tactical carry upside but not an unqualified medium-term bullish call.

Core retail sales beat at 0.7%, but headline sales contracted 0.5%. RBNZ hike probability still rose to 89.82%, while deep COT shorts narrowed and 71% retail shorts preserve squeeze potential.

MUFG Bank reports that speculative NZD shorts reached a record in data extending back to 2006. It reads that crowding as deep scepticism toward the RBNZ path and doubts that the easing implied by the broader market will be delivered, creating meaningful short-squeeze potential if inflation stays firm. Credit Agricole CIB calculates NZD/USD fair value near 0.5860 and an overvaluation z-score of 1.18; because its stable-model sell threshold is 1.5-SD, valuation is a warning rather than an active short signal. Westpac Economics identifies the RBNZ stance and Q3 CPI forecast as the decisive local catalysts, especially after the split between stronger core retail sales and weaker headline spending. Danske Bank does not provide a standalone NZD target, but its medium-term broad-USD strength view is the relevant counterweight. The combined message is that NZD can remain bullish through pricing and a squeeze, but conviction must stay lower than AUD because current COT is still deeply negative and domestic demand is mixed.

Corporate profits rebounded 8.7%, but CAD was the G10 laggard after the 50% tariff announcement and lower Oil removed part of its commodity cushion. BoC hold pricing was effectively unchanged at 92.77%.

Scotiabank estimates Q2 GDP around 3.3–4% annualised and argues that a closing output gap means the BoC should not wait for all slack to disappear before considering a hike. It also estimates that a workable trade deal could reduce the effective US tariff rate on Canadian exports from roughly 5.5% to 3.7%, with autos, steel and lumber carrying the largest sector damage. Wells Fargo Economics expects similar 3.3% growth but draws a different policy conclusion, treating resilience as sufficient for the BoC to remain on hold rather than tighten. Danske Bank expects the BoC to hold through 2026 and projects USD/CAD rising to 1.46 in 12 months as rate differentials favour USD. Tactically, ING sees correction risk toward 1.3800/1.3910 before USD sellers reappear, while MUFG Bank says the prior USD/CAD downside had become overextended relative to the two-year swap spread; Credit Agricole CIB places fair value near 1.3808. SEB and Westpac Economics agree that the 50% tariff escalation is the dominant near-term catalyst. Institutions therefore disagree on the eventual BoC response, but broadly agree that trade uncertainty prevents CAD strength from becoming durable.

USD/JPY moved back above 159 despite softer US long yields, and BoJ hike odds fell 4.39pp to 62.93%. Negative COT deepened and retail remains 73% long JPY, reinforcing weak carry mechanics but raising intervention squeeze risk.

Danske Bank expects near-term USD/JPY pressure to persist, forecasting 161 in one month and 160 in three months before a gradual recovery toward 155 over 12 months. It expects one BoJ hike within three months and another within a year, but stresses that intervention cannot change the trend without a decline in US yields. MUFG Bank similarly notes that September hike pricing had reached roughly 80–82% without generating sustained Yen demand; its near-term USD/JPY range is 157–161, and it sees around a 50% chance of two hikes by year-end. Credit Agricole CIB places spot close to fair value near 158.93, but warns that any perception the BoJ is tightening under US pressure could damage policy independence and JPY credibility. Spectra Markets therefore expresses Yen-upside risk through defined-loss structures—a short EUR/JPY position and CHF/JPY put spread—rather than a broad unhedged JPY call. The common conclusion is bearish near-term mechanics with a potentially violent reversal if intervention or BoJ guidance changes the yield relationship.

CHF had no fresh domestic release and SNB hold probability climbed to 95.46%. Negative COT and 56% retail longs keep the base bearish outside a verified geopolitical shock.

Danske Bank expects widening rate differentials and an SNB hold at 0% to weaken CHF near term, projecting EUR/CHF around 0.94 in one month and 0.95 in three months before medium-term haven demand pulls it back toward 0.93 over 12 months. Standard Chartered is more constructive on the long horizon, targeting USD/CHF at 0.78 on Switzerland’s current-account surplus, low public debt and safe-haven quality, but acknowledges that the 0% policy rate and intervention risk limit a one-way move. Credit Agricole CIB focuses on the tactical positioning extreme: it classifies CHF as overbought and holds long USD/CHF with a +3% target and -1.5% stop. Spectra Markets also avoids a simple outright CHF-long expression, using a CHF/JPY 199/196 put spread to define the loss. The views reconcile through horizon: CHF is a funding currency in the current calm regime, but retains medium-term value and immediate convexity if geopolitical stress becomes physical.

Gold retains support from debt credibility, USD debasement and Iran sanctions, but a higher Fed hike tail and any long-yield breakout raise real-yield risk. Managed Money is +34.9% and still rising; 60% retail longs are the contrarian headwind.

World Gold Council reports a 4.4% weekly rise to $4,582/oz and a break above the 200-day average, with resistance at $4,639 and $4,833 and support at $4,514 and $4,325–4,311. It argues that Treasury attempts to suppress nominal yields while inflation remains sticky are supportive for Gold, although a sharp real-yield rise around Jackson Hole is the main macro risk. Standard Chartered retains a $4,900 target after the break above $4,400, but warns that the speed of the rally creates profit-taking risk; its technical map places support near $4,161 and resistance near $4,706. Westpac Economics records Gold around $4,603 and the strongest ETF-inflow day since September 2025, while Natixis reports roughly $4,640 and Reuters $4,617, both linking the move to Dollar weakness and Treasury concern. Spectra Markets frames the same move as part of a broader debasement basket with silver and bitcoin. The institutional consensus is clearly constructive, but entry quality matters because futures, options, ETFs and retail are already increasingly long.

Oil settled lower despite nearly 60 Iran-linked sanctions and a claimed Houthi strike. Improving supply narratives and the absence of confirmed disruption dominate for now. Managed Money is only +4.6%, while Brent retail is 59% long and WTI retail 73% long.

SEB places Brent near $93 as Washington shifts toward economic isolation of Iran, but does not treat sanctions alone as proof of a physical shortage. Danske Bank is structurally more bearish, forecasting Brent at $80 in both Q3 and Q4 before $85 in 2027 as Gulf, Venezuelan, Nigerian, Argentine and Brazilian supply improves; it contrasts that base with the earlier spike near $100 when Hormuz risk was most acute. MUFG Bank highlights the nonlinear China channel: roughly 80% of Iran’s 2025 exports went to China, so sanctions on Chinese refiners or banks could transform an Iran measure into a broader trade escalation. Scotiabank notes that the latest roughly 2% Oil decline directly contributed to CAD underperformance. Westpac Economics records WTI near $87.06 and longer Red Sea routes, while Standard Chartered maps WTI support near $76.9 and resistance around $96.1. Natixis reports Brent near $93.2 and Reuters front-month crude near $86.64, illustrating the unusually wide benchmark and timing range. Institutions therefore preserve a bullish disruption tail, but the common base requires verified export or transit loss before abandoning the improving-supply view.

The Dow rose but SPX, NDX and Russell fell, with Technology and semiconductors driving NQ underperformance. ES COT stayed negative and widened; NQ shorts covered sharply but remain deep. ES retail shorts provide a contrarian cushion, while NQ retail at 53% short is neutral.

Natixis makes NVIDIA earnings the week’s dominant equity catalyst after NDX fell 2.5% over the prior week and the semiconductor index lost 5.4%; it notes that one positive session ended a five-day decline but did not repair the technical damage. Reuters reaches the same catalyst view and records very high expected data-centre-led revenue growth, making the result relevant to the entire AI-capex complex rather than one stock. Scotiabank observes NQ futures underperforming ES futures, consistent with higher duration and concentration sensitivity. Standard Chartered judges the near-term cross-asset balance negative: buybacks and a possible Canada deal are offsets, but weak consumer sentiment, China data and hawkish Fed risk dominate; its S&P map uses 7,364 support and 7,867 resistance around a 19.6x forward valuation. World Gold Council adds that a roughly 75bp rise in the 10-year real yield from its low has historically preceded equity setbacks, a warning aimed particularly at long-duration NQ. Westpac Economics records the prior broad rebound but does not remove the event risk. The consensus therefore prefers ES over NQ if yields stabilise, while remaining cautious on both into NVIDIA and Jackson Hole.