Key Insights

U.S. employment fell by 23,000 in July, putting pressure on the U.S. dollar and reducing confidence in the strength of the labour market.

The Canadian dollar received support after Canada added 75,000 jobs, while the Japanese yen remained sensitive to intervention and Bank of Japan policy expectations.

This week, traders are watching the Reserve Bank of Australia, U.S. inflation, UK GDP and another round of major global economic data.

Weak U.S. Jobs Put Pressure on the Dollar

The biggest forex event came at the end of the week with the U.S. employment report.

NFP, or Non-Farm Payrolls, measures the monthly change in U.S. jobs outside the farming sector. Payroll employment fell by 23,000 in July, while the unemployment rate was 4.1%. The May and June payroll figures were also revised lower by a combined 103,000 jobs.

The weaker labour data mattered because employment is one of the main areas the Federal Reserve watches when setting interest rates.

The U.S. dollar weakened after the report as markets reassessed expectations for future Federal Reserve policy.

However, other parts of the U.S. economy remained more resilient. The ISM Manufacturing PMI reached 55.6 in July. PMI, or Purchasing Managers’ Index, measures business activity, with readings above 50 generally showing expansion. The ISM Services PMI also remained above 50 at 54.1.

This created a mixed picture.

Business activity remained in expansion, but the labour market showed clearer signs of weakness.

Canadian Jobs Supported the Canadian Dollar

Canada delivered a much stronger labour report.

Employment increased by 75,000 in July, while the unemployment rate declined from 6.5% to 6.4%, its lowest level since July 2024.

For forex traders, employment data can influence expectations for the Bank of Canada’s next interest rate decisions.

Stronger labour conditions may affect those expectations and can influence currency pairs such as USD/CAD, which measures the U.S. dollar against the Canadian dollar.

Yen Intervention Remained a Major Market Risk

The Japanese yen also remained one of the most closely watched currencies.

Just before the week began, Japan confirmed that Japanese and U.S. authorities had jointly intervened in the currency market to support the yen on July 31. Japanese officials also said they remained prepared to act again if necessary.

Currency intervention happens when governments or central banks enter the foreign exchange market to influence the value of a currency.

Because of the unusual joint action, traders remained cautious around USD/JPY throughout the week.

The yen strengthened again after the weak U.S. jobs report on August 7 as falling U.S. yields added pressure to the dollar.

Oil and the Strait of Hormuz Remained a Wildcard

Middle East developments continued to affect global markets.

Commercial shipping through the Strait of Hormuz remained heavily restricted as Iran and Oman worked toward an agreement that could restore shipping through the important energy route.

The Strait of Hormuz is one of the world’s most important routes for oil and gas exports.

Changes in shipping conditions can therefore affect oil prices. Higher energy prices can also influence inflation expectations, central bank policy and currencies linked to oil imports or exports.

What to Watch This Week: August 10–16

Monday: Bank of Japan Signals Stay in Focus

The Bank of Japan released its Summary of Opinions from its July 30–31 meeting on August 10.

The document showed that policymakers discussed whether interest rates may need to rise faster if inflation pressures remain strong.

The BOJ currently has its short term policy rate around 1.0% after keeping rates unchanged at its July meeting.

This keeps USD/JPY in focus because the pair is being influenced by three major forces at the same time: U.S. monetary policy, Japanese interest rates and intervention risk.

Tuesday: Reserve Bank of Australia Rate Decision

The Reserve Bank of Australia meets on August 11.

The RBA’s cash rate currently stands at 4.35%, with its next decision scheduled for 2:30 p.m. Australian Eastern Standard Time.

Interest rate decisions can strongly affect the Australian dollar because higher or lower rates can change the attractiveness of holding a currency.

The decision and accompanying statement may therefore bring additional movement to pairs such as AUD/USD and AUD/JPY.

Wednesday: U.S. CPI Takes Center Stage

The next major test for the U.S. dollar arrives on August 12 with July CPI.

CPI, or Consumer Price Index, measures changes in the prices consumers pay for goods and services. It is one of the main measures of inflation watched by the Federal Reserve.

The U.S. Bureau of Labor Statistics has confirmed the July CPI release for August 12 at 8:30 a.m. Eastern Time.

After the weak jobs report, inflation data may become even more important because traders are trying to understand how the Federal Reserve may balance employment weakness against inflation pressure.

Thursday: U.S. PPI, UK GDP and Norway Rates

Thursday brings several important releases.

The United States publishes July PPI, or Producer Price Index, on August 13. PPI measures changes in prices received by producers and can provide clues about inflation pressures before they reach consumers.

The UK also publishes its first estimate of second-quarter GDP on August 13. GDP, or Gross Domestic Product, measures the total value of goods and services produced by an economy.

This could make GBP/USD and other pound pairs more sensitive to changes in expectations for the UK economy.

Norway’s central bank also announces its policy rate decision on August 13. The current Norges Bank policy rate is 4.25%.

Friday: U.S. Retail Sales and Euro-Area Growth

Attention returns to the U.S. economy on August 14 with retail sales.

Retail sales measure consumer spending at stores and other retailers. Because consumer spending is a major part of the U.S. economy, large changes can affect expectations for economic growth and Federal Reserve policy.

Eurostat also publishes an updated estimate of second-quarter euro-area GDP and employment on August 14.

The preliminary estimate showed euro-area GDP growing 0.4% quarter on quarter during the second quarter, so traders may watch whether the updated figure confirms or changes that picture.

The Week Ahead

Last week ended with a clearer sign of weakness in the U.S. labour market.

That shifted some market attention away from whether the U.S. economy remained strong and toward how the Federal Reserve may respond if employment continues to soften.

This week brings the other half of that question: inflation.

U.S. CPI and PPI may help markets judge whether weaker employment is happening alongside easing price pressures or whether inflation remains difficult for the Federal Reserve to manage.

Outside the United States, the RBA decision, UK GDP, Norges Bank and euro-area data could create separate catalysts for the Australian dollar, British pound, Norwegian krone and euro.

The Japanese yen remains another major focus. Intervention risk has not disappeared, while the Bank of Japan is openly discussing the possibility of moving interest rates higher more quickly if inflation stays strong.

Middle East developments remain the main geopolitical wildcard.

Any major change in the Strait of Hormuz situation could quickly affect oil prices, inflation expectations and risk sentiment across global markets.

⚠️ Disclaimer:
This article is for informational and educational purposes only and does not constitute financial advice. Trading involves risk. Always conduct your own analysis or consult a qualified professional before making financial decisions.