Softer US Data Weighs on USD as Oil Risks Rise - CPT Markets

Market Wrap-up: US Data Shifts Fed Bets as Oil Risks Persist

The past week saw sharp cross-asset moves as key US economic data temporarily overshadowed geopolitical developments in the Middle East. The data flow materially shifted expectations for Fed policy, while persistent US-Iran tensions continued to support oil prices.

U.S. stock indices wrapped up the week on an uneven note. The Dow Jones slipped 0.6%, while the Nasdaq Composite edged up 0.1% and the S&P 500 gained 0.4%. Notably, on August 13th, the S&P 500 crossed above the 7,800 point mark for the first time, as S&P 500 companies reported second quarter earnings with profits up around 50% YoY.

In precious metals, gold gained more than 1% over the week and briefly approached USD 4,450/Oz. The upside was supported by a softer US data flow, with NFP, CPI and PPI all coming in below or in line with market expectations. The combination reduced pressure for further Fed tightening and shifted the rate outlook more decisively toward a September hold.

Most economists now expect the Fed to keep the current target range unchanged at 3.50%-3.75%. According to CME FedWatch, markets are pricing a 30.8% probability of a rate hike at the September meeting, down sharply from around 52.2% the previous week.

US consumer demand also showed signs of losing momentum. According to estimates released by the US Commerce Department on August 14, US retail sales unexpectedly fell 0.6% month on month in July 2026 to USD 763.6 billion, as consumers reduced spending at auto dealerships and online retailers.

The result was sharply below the previous market forecast for a modest 0.1% increase. Excluding motor vehicles and gasoline, US retail sales still declined 0.2% from June 2026. Following the release, the USD fell to its lowest level since May 2026 and is now down 1.7% for the quarter.

In energy markets, oil prices extended their advance, rising 5% over the week as tensions between the US and Iran showed little sign of easing. Although President Trump said the US would not use force against Iran, he indicated that further sanctions would be imposed while the Strait of Hormuz remained closed.

US Treasury Secretary Scott Bessent warned that Washington was preparing measures to isolate Iran's economy on an unprecedented scale. The comments came after US Defense Secretary Pete Hegseth said US forces could maintain the blockade of Iranian ports indefinitely.

Looking ahead, this week offers a lighter US data calendar than the previous week. However, ADP Weekly Employment Change, Unemployment Claims, the Philly Fed Manufacturing Index and, most importantly, the minutes from the July FOMC meeting will draw close market attention.

XAU/USD: Gold Gains as Fed Hike Bets Fade

Key takeaway:

• Gold advanced on August 14 and posted a weekly gain as a weaker USD and softer US inflation data reinforced expectations that the Federal Reserve will keep rates unchanged at next month's meeting. Most economists now expect the Fed to maintain the current target range at 3.50%-3.75%.
• According to CME FedWatch, markets are pricing a 30.8% probability of a September rate hike, down sharply from around 52.2% the previous week.

Technical Outlook:

• Daily Bias: Bullish
• Support: 4,356
• Resistance: 4,450

Oil: WTI Rises on Strait of Hormuz Risks

Key takeaway:

• WTI prices rose on August 14 after the US indicated that the naval blockade targeting Iranian ports could remain in place for an indefinite period, reviving concerns over energy flows through the Strait of Hormuz.
• Friday's upside momentum accelerated after US Treasury Secretary Scott Bessent warned in an interview with Newsmax that Washington was preparing measures to isolate Iran's economy on an unprecedented scale.
• The United Arab Emirates announced that Iran attacked three vessels belonging to the Abu Dhabi National Oil Company, known as ADNOC, as the ships were transiting the Strait of Hormuz.

Technical Outlook:

• Daily Bias: Bearish
• Support: 80.69
• Resistance: 83.30

DXY: Dollar Slides as Fed Hike Bets Ease

Key takeaway:

• The USD fell to its lowest level since May 2026 after unexpectedly weak US retail sales reduced expectations for a Federal Reserve rate hike.
• The US Dollar Index is now down 1.7% for the quarter, reflecting the broader repricing of US rate expectations following softer economic data.
• Meanwhile, the minutes from Wednesday's July FOMC meeting will take center stage, offering further detail on the hawkish division that unsettled markets at the end of last month.

Technical Outlook:

• Daily Bias: Bearish
• Support: 99.30
• Resistance: 99.80

EUR/USD: Euro Climbs as Dollar Weakness Deepens

Key takeaway:

• The euro climbed to a two-month high as the USD came under pressure from reduced expectations for a Fed rate hike.
• The euro also benefited from growing market expectations that the European Central Bank (ECB) will deliver a final 25 basis point rate hike at its September meeting, as inflation remains above the 2% target.

Technical Outlook:

• Daily Bias: Bullish
• Support: 1.15600
• Resistance: 1.16000

USD/JPY: Yen Gains Despite Weaker Japanese GDP

Key takeaway:

• The Japanese yen strengthened against a weaker USD, despite softer than expected Japanese GDP data.
• Japan's economy expanded 0.3% in Q2, following 0.5% growth in Q1 and falling short of the market's 0.5% expectation. On an annualized basis, GDP grew 1.1%, versus expectations of 2.0% and the previous quarter's 1.8% growth.
• The significant downside surprise creates a headwind for the Bank of Japan's normalization path, as policymakers are relying on resilient domestic demand to support further rate increases after moving away from its ultra-loose monetary policy. This limits yen upside and leaves the broader USD/JPY structure aligned with the bullish technical bias despite the recent yen strength.

Technical Outlook:

• Daily Bias: Bullish
• Support: 159.00
• Resistance: 159.52

Markets are being driven by two competing forces. Softer US data has pushed September Fed hike expectations sharply lower, weighing on the USD and supporting gold and EUR/USD.

At the same time, persistent US-Iran tensions and the risk around the Strait of Hormuz continue to keep oil prices elevated.

US equities remain relatively resilient, with the S&P 500 breaking above 7,800 as strong corporate earnings offset some of the pressure from softer consumer spending.

In FX, USD weakness remains the dominant theme, while weaker Japanese GDP is limiting the scope for sustained yen gains despite the current USD/JPY pullback.

For now, the market is trading the shift in Fed expectations alongside the geopolitical risk premium in oil. The next focus will be on US employment data, the Philly Fed Manufacturing Index and, most importantly, the July FOMC minutes for further clues on the Fed's policy divide.

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