The USD is trading at new highs as North American traders commence the day. In a technical analysis, the EURUSD, USDJPY, and GBPUSD are scrutinised regarding their bias, targets, and risks.
Early in the week, the Reserve Bank of Australia is expected to reduce its cash rate to 3.60% from 3.85%. Australia anticipates a 0.8% quarterly rise in the Wage Price Index, a 25.3K employment change, and a drop in the unemployment rate to 4.2%.
Focus on US Inflation and Spending
In the United States, attention is on inflation and spending. The July CPI is expected at +0.2% m/m and y/y at 2.8%. Headline PPI and core PPI are forecast to rise by 0.2%, with jobless claims projected at 225K. Retail sales are seen to increase by 0.5% m/m, and the University of Michigan’s consumer sentiment is predicted at 61.9.
From the UK, the GDP is forecast to rise by 0.2% in July. Over the weekend, Federal Reserve Governor Michelle Bowman supports three rate cuts by 2025, noting economic slowdown and labor market weaknesses.
Moreover, Nvidia and AMD agree to share 15% of specific chip sale revenues with the U.S. government for export licenses. Lastly, Trump and Putin are set to meet to attempt ending the Ukraine war, with the land concession being a contentious issue.
The US dollar is showing strength today, but we see this as a temporary move against the bigger trend. The key takeaway is the sharp drop in Treasury yields, with the 2-year yield now at 3.76%, reflecting Governor Bowman’s signal for three rate cuts this year. This bond market activity suggests traders are positioning for a weaker dollar in the coming months, despite today’s spot price action.
This week’s US inflation data is the most critical event for us. With headline CPI forecast at +0.2%, any miss to the downside would confirm the Fed’s dovish pivot and could trigger a sharp reversal in the dollar. We must remember that the annual inflation rate fell below 3.0% back in May 2025, and a soft print here would reinforce the narrative that the Fed has room to cut rates aggressively.
Governor Bowman Signals Market Shift
Governor Bowman’s comments are a game-changer, pointing to a “sharp deterioration” in the labor market. Looking back, after the strong job growth seen throughout 2024, the reports for June and July 2025 both missed expectations, with the latest nonfarm payroll number coming in at just 155k. This data supports her view and suggests that options strategies that bet against dollar strength, like buying puts on the dollar index (DXY), could be profitable.
The upcoming meeting between Trump and Putin in Alaska introduces significant, unquantifiable risk. This is a binary event where the outcome could cause sudden, sharp moves across all asset classes, from currencies to equities. We are looking at this as a prime opportunity to buy volatility through options, as the market is not fully pricing in the extreme possibilities of either a surprise peace deal or a complete breakdown in talks.
On the corporate front, the Nvidia and AMD deal with the Trump administration removes some uncertainty over China sales, but at a clear cost. Sharing 15% of revenue from key chips will cap the upside potential for these stocks, which explains their pre-market weakness today. For traders holding these stocks, selling out-of-the-money call options could be a prudent way to generate income while hedging against limited gains.
For the British pound, this week’s GDP data is the main focus. After the Bank of England held rates steady at its last meeting, citing stubborn services inflation, a rebound of 0.2% in the economy could force them to maintain a hawkish stance longer than the Fed. This divergence would create a strong technical case for buying GBP/USD, especially if US inflation data comes in soft.
The Reserve Bank of Australia is set to cut its cash rate to 3.60%, signaling a clear dovish path. While this would normally weaken the AUD, the Fed’s own dovish pivot creates a “race to the bottom” scenario. In the short term, however, the RBA is acting while the Fed is only talking, which may keep downward pressure on the AUD/USD pair until the US CPI data is released.
