Fed Cut Odds Hit 91%, DXY Falls to 98.2 (11-15 August)

The dollar index slipped to 98.2, set for a 0.8% weekly loss, as weak US data and fresh gold tariffs supported Fed rate cut bets to a 91% probability for September.

EUR/USD eased 0.31% to 1.1641, down 0.82% over the month but still up 6.65% year-on-year. GBP/USD climbed to 1.34 after the BoE cut rates to 4% in a narrow 5–4 decision, with higher inflation forecasts tempering expectations for further easing. USD/JPY steadied near 147.3 as BoJ minutes revealed splits over future rate hikes.

Gold hovered around $3,400, while December futures reached a record $3,534 after US tariffs on gold bars fueled safe-haven demand for a second straight week. Brent crude edged toward $67 but ended the week down 4%, pressured by rising OPEC supply signals, easing output fears, and geopolitical developments including US-Russia talks and new US tariffs on India with threats toward China.

US 10-year Treasury yields rose to 4.27%, extending a rebound from three-month lows on soft data, tariff pressures, and concerns over Fed independence following Trump’s nomination of Stephen Miran. Auction demand weakened, while Japan’s 10-year yield stayed near 1.49% as BoJ policymakers remained divided on rate outlook, weighed by slowing household spending and economic uncertainty.

Fixed Income

US 10-year Treasury yields gained for a fourth session to 4.27%, rebounding from recent lows on the back of soft US data, gold tariffs, and heightened political risk at the Fed after Trump nominated Stephen Miran. Weak demand in bond auctions and rising cut expectations added pressure. Markets now look to next week’s CPI for guidance.
Germany’s 10-year Bund yield rose 5 bps to 2.69% on August 8, up 6 bps this month and 47 bps year-on-year.

UK 10-year gilt yields climbed above 4.55% following the BoE’s 25 bps cut to 4%, with a divided committee and stubborn services inflation over 4% limiting expectations for more cuts. Low long-term issuance also helped cap yields.

Japan’s 10-year yield held at 1.49% as BoJ minutes showed a split between members advocating gradual hikes on inflation risks and those preferring caution due to weak growth. Household spending fell in June under the weight of tariffs and inflation.

S&P Global Services PMI (July)

The US Services PMI rose to 55.7 in July from 52.9, marking the strongest growth in seven months and extending the expansion streak to 2.5 years. New business increased despite export orders falling for the fourth month, with tariffs and policy uncertainty weighing on foreign demand. The latest drop in export orders was marginal and the slowest in the current sequence of declines.

BoE Interest Rate Decision (August 2025)

The BoE cut its Bank Rate by 25 bps to 4%, its fifth cut in a year, as the UK economy slows and labor market risks mount. Inflation remains above forecasts and is now projected to hit 4% in September, double the target, limiting room for aggressive easing.

30-Year Bond Auction

The US Treasury sold $25 billion in 30-year bonds at 4.813%, more than two bps above the pre-auction level, indicating weak investor demand.

ISM Non-Manufacturing PMI (July)

The Manufacturing PMI dipped to 48 in July from 49 in June, indicating ongoing contraction in the sector. New orders fell for a sixth straight month to 47.1, while production rose to 51.4. The Prices Index stayed elevated at 64.8, and employment weakened further to 43.4.

Currencies

The dollar index fell to 98.2, heading for a 0.8% weekly loss as soft US data and political uncertainty at the Fed lifted September cut odds to 91%. Trump’s nomination of Stephen Miran and tariffs on gold bars added to concerns over Fed independence.

EUR/USD slipped 0.30% to 1.1642, down 0.82% on the month but up 6.66% year-on-year. USD/JPY held near 147.3, with BoJ minutes showing divisions on rate hikes.

BP/USD rose to 1.34 after the BoE’s 25 bps cut, though a narrow vote and higher inflation forecast cooled expectations for further easing.

Commodities

Spot gold held at $3,400, while December futures hit a record $3,534 after US tariffs on gold bars surprised markets, potentially impacting Switzerland’s exports. Gold gained nearly 1% on the week, its second straight weekly rise, supported by safe-haven flows and rate cut expectations.

Silver traded above $38, heading for a 3% weekly gain on Fed cut bets and tariff uncertainty. Fresh retaliatory tariffs of 10%–41% deepened concerns over global trade.

WTI crude closed at $63.9, near a two-month low, down over 5% for the week as new US tariffs stoked fears of weaker global demand. Hopes for a Trump–Putin summit fueled speculation on eased Russia sanctions, but secondary sanctions risks on China and India kept sentiment cautious.

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