The US Dollar has started the week on firmer ground after touching a two-month low following weaker-than-expected US employment data. Investors are now turning their attention toward upcoming inflation figures and their potential implications for Federal Reserve policy.
The Dollar Index stands at 99.691, up 0.15% on the day, while the broader Bloomberg Dollar Spot Index has also gained approximately 0.2%. The recovery follows Friday's decline after weaker July employment figures raised questions about the outlook for further interest rate increases.
Rising oil prices are providing some support to the Dollar, with Brent crude remaining above $84 per barrel amid continued uncertainty surrounding the Strait of Hormuz. Markets are also positioning ahead of this week's US CPI release, which could materially influence expectations for Federal Reserve policy should inflation prove stronger than anticipated.
The euro remains relatively resilient. EUR/USD trades at approximately 1.1550, down modestly on the day but up 1.17% over the past month. Recent support has come from stronger-than-expected Eurozone economic growth, with second-quarter GDP expanding 0.4%—twice the projected pace—and the region's full-year 2026 growth forecast revised higher to 0.8% from 0.5%.
Sterling is among the stronger G10 currencies, with GBP/USD trading around 1.3497. The Pound has gained 0.48% over the past week and remains modestly positive against the Dollar year-to-date, making it one of the relatively few major currencies to hold its ground against the Greenback in 2026.
The Japanese Yen remains the most notable development within global currency markets. USD/JPY has risen to 158.70, with the Yen weakening approximately 0.9% against the Dollar during August. This follows a 3.2% gain in July that was supported by coordinated US-Japan currency intervention.
The impact of that intervention is now beginning to fade as investors rebuild short Yen positions. This comes despite a more hawkish tone from the Bank of Japan, whose latest meeting summary indicated increasing inflation risks and the possibility of a faster pace of interest rate increases. The potential for further official intervention therefore remains an important consideration as Yen weakness re-emerges.
Overall, currency markets remain focused on the interaction between economic data, interest rate expectations, and policy intervention. Upcoming US inflation figures are likely to be particularly important in determining the Dollar's near-term direction, while the Yen remains a central focus as markets assess the likelihood of further intervention by Japanese authorities.
