The USD is hitting new highs as North American traders start their day. We’ll look at the EURUSD, USDJPY, and GBPUSD to analyze their trends, targets, and risks. This week, the Reserve Bank of Australia plans to lower its cash rate to 3.60% from 3.85%. Expectations in Australia include a 0.8% quarterly rise in the Wage Price Index, 25,300 new jobs, and a drop in the unemployment rate to 4.2%.

Focus on US Inflation and Spending

In the U.S., the spotlight is on inflation and consumer spending. The July CPI is expected to show +0.2% month-over-month and 2.8% year-over-year. Both headline and core PPI are projected to rise by 0.2%, with jobless claims anticipated at 225,000. Retail sales are expected to climb by 0.5% month-over-month, while the University of Michigan’s consumer sentiment is forecast to be at 61.9. For the UK, the GDP is predicted to grow by 0.2% in July. Meanwhile, Federal Reserve Governor Michelle Bowman supports three rate cuts by 2025, citing a slowdown in the economy and weaknesses in the job market. In other news, Nvidia and AMD have agreed to share 15% of certain chip sale revenues with the U.S. government for export licenses. Additionally, Trump and Putin are scheduled to meet to discuss ending the Ukraine war, with land concessions a significant point of contention. While the US dollar is strong today, we believe this is just a temporary shift in a larger trend. A key takeaway is the sharp decline in Treasury yields, with the 2-year yield now at 3.76%, indicating that traders are preparing for a weaker dollar in the future, even though the current price action appears strong. The most important event this week is the US inflation data. With the CPI expected at +0.2%, any lower-than-expected figures could confirm the Federal Reserve’s dovish approach and potentially reverse the dollar’s gains. Recall that the annual inflation rate fell below 3.0% in May 2025, and a soft reading could strengthen the case for aggressive rate cuts.

Governor Bowman Signals Market Shift

Governor Bowman’s remarks highlight a “sharp decline” in the job market. After strong job growth in 2024, reports for June and July 2025 disappointed, with nonfarm payroll adding only 155,000 jobs. This supports her assessment and suggests that strategies betting against dollar strength, such as buying puts on the dollar index (DXY), could be lucrative. The upcoming Trump-Putin meeting in Alaska brings significant and unpredictable risk. This event could lead to sudden price swings across all markets, including currencies and stocks. We see this as a prime chance to buy options for volatility, as the market may not be fully prepared for either a surprising peace agreement or a total breakdown in negotiations. On the corporate side, the Nvidia and AMD deal with the Trump administration eliminates some uncertainties regarding sales to China, but comes with a cost. Sharing 15% of revenue from key chips limits their potential upside, which explains the pre-market weakness in these stocks. Traders holding these stocks might consider selling out-of-the-money call options to generate income and hedge against limited gains. For the British pound, this week’s GDP data is crucial. After the Bank of England kept rates steady at its last meeting due to stubborn services inflation, a 0.2% rebound in the economy could prompt them to maintain a more aggressive stance than the Fed. This divergence could present a strong case for buying GBP/USD, especially if US inflation data is soft. The Reserve Bank of Australia is poised to cut its cash rate to 3.60%, indicating a dovish outlook. Normally, this would weaken the AUD, but the Fed’s own dovish stance creates a competitive scenario. In the short term, however, the RBA is taking action while the Fed is merely talking, which might keep pressure on the AUD/USD pair until the US CPI data is released. Create your live VT Markets account and start trading now.

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