Conflict Continues While The Oil Flow Through SoH Decreases

OVERVIEW : Friday, July 24th, 26’

Markets remained focused on the US-Iran conflict, with CENTCOM conducting a 13th consecutive night of strikes against Iranian military targets. President Trump said Iran wants a deal but is "not yet ready", while reports suggested he is increasingly losing patience with the conflict. Iran rejected both the latest US ceasefire proposal and the revised 10-day ceasefire linked to the Strait of Hormuz, keeping the diplomatic outlook subdued. Elsewhere, CENTCOM confirmed the Strait of Hormuz remains open, although disruptions across the Hormuz and Red Sea continue to keep a geopolitical risk premium in energy markets. The Trump administration also announced fresh tariffs of 10–12.5% on imports from 60 countries, adding to the broader risk backdrop. Overall, geopolitics remained firmly in control of price action, with energy markets continuing to lead broader macro sentiment.

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US DOLLAR

USD remained supported although with choppy action on the day, closing marginally lower. With the geopolitical backdrop and broader defensive flows continuing to underpin the currency. Elevated energy prices and ongoing Middle East tensions kept demand for the Dollar firm, while fresh US tariff announcements added to the cautious tone. The domestic backdrop also remained supportive. Flash PMIs showed services and the composite index strengthening, reinforcing expectations for resilient US growth despite softer manufacturing, while new home sales and building permits also pointed to a still solid economy. Overall, the combination of resilient US data and the external backdrop kept the Dollar well bid throughout the day.

Data:

  • US S&P Global Manufacturing PMI Flash (Jul) 53.8 vs. Exp. 54.5 (Prev. 53.9)
  • US S&P Global Services PMI Flash (Jul) 53.6 vs. Exp. 51 (Prev. 51.2)
  • US S&P Global Composite PMI Flash (Jul) 53.6 vs. Exp. 52.3 (Prev. 51.9)


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EURO

EUR remained on the weaker side throughout the day, with choppy price action in the Dollar and broader sentiment keeping the currency under pressure. Flash PMIs surprised to the upside across both the Eurozone and Germany, pointing to improving activity, while ECB officials continued to leave the door open for further tightening if inflation risks persist. However, policymakers maintained their data-dependent stance and reiterated that there is still no evidence of second-round inflation effects, limiting any meaningful repricing of the ECB path. Trade tensions also remained in focus after fresh US tariffs on EU goods drew criticism from European officials.

Data:

  • EU S&P Global Composite PMI Flash (Jul) 51.9 vs. Exp. 50.3 (Prev. 50.0).
  • EU S&P Global Manufacturing PMI Flash (Jul) 52.0 vs. Exp. 51.3 (Prev. 51.4).
  • EU S&P Global Services PMI Flash (Jul) 51.6 vs. Exp. 49.8 (Prev. 49.4).
  • German S&P Global Manufacturing PMI Flash (Jul) 52.2 vs. Exp. 50.1 (Prev. 50.3).
  • German S&P Global Composite PMI Flash (Jul) 51.2 vs. Exp. 49.8 (Prev. 49.5).
  • German S&P Global Services PMI Flash (Jul) 49.6 vs. Exp. 48.8 (Prev. 48.6).


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GREAT BRITISH POUND

GBP was well supported on the day, underpinned by a strong run of domestic data. Retail sales comfortably beat expectations, helped by World Cup spending and favourable weather, while flash PMIs surprised to the upside across manufacturing, services and the composite index, pointing to a pickup in activity. GfK consumer confidence also improved more than expected, reinforcing the view that domestic demand remains resilient despite the broader geopolitical backdrop.

Data:

  • UK S&P Global Composite PMI Flash (Jul) 52.1 vs. Exp. 49.7 (Prev. 49.3).
  • UK S&P Global Services PMI Flash (Jul) 51.8 vs. Exp. 49.4 (Prev. 48.8).
  • UK S&P Global Manufacturing PMI Flash (Jul) 52.8 vs. Exp. 52.1 (Prev. 52.5).
  • UK Retail Sales ex Fuel YoY (Jun) Y/Y 5.4% vs. Exp. 3.2% (Prev. 4.6%).
  • UK Retail Sales MoM (Jun) M/M 1.0% vs. Exp. 0.2% (Prev. 1.2%).
  • UK Retail Sales ex Fuel MoM (Jun) M/M 1.1% vs. Exp. -0.4% (Prev. 1.2%).
  • UK Retail Sales YoY (Jun) Y/Y 4.2% (Prev. 3.2%).


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AUSTRALIAN DOLLAR

AUD was well supported on the day, helped by a weaker Dollar and another encouraging set of domestic data. Flash PMIs showed private sector activity accelerating to its strongest pace this year, with services leading the improvement while manufacturing also edged higher. The data reinforced signs that domestic demand is recovering, providing additional support for the currency alongside the softer USD backdrop.


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CANADIAN DOLLAR

CAD underperformed on the day as the oil rally paused, removing one of the currency's main sources of support. Domestic data was also softer, with PPI falling more than expected on the month, while new home prices continued to edge lower, highlighting ongoing weakness in the housing market. Trade tensions remained in focus after Canada rejected the latest US tariffs and signalled it is considering reciprocal measures, although the move had little immediate impact on the currency.

Data:

  • Canadian PPI MoM (Jun) M/M -1.4% vs. Exp. -0.4% (Prev. 1.2%).
  • Canadian Wholesale Sales MoM Prel (Jun) M/M 2.7% (Prev. 0%).
  • Canadian Manufacturing Sales MoM Prel (Jun) M/M -0.1%.
  • Canadian New Housing Price Index MoM (Jun) M/M -0.1% vs. Exp. -0.2% (Prev. -0.3%).
  • Canadian PPI YoY (Jun) Y/Y 12.4% (Prev. 13.6%).


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NEW ZEALAND DOLLAR

NZD outperformed on the day, supported by the weaker Dollar and resilient demand despite the softer risk backdrop.


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JAPANESE YEN

JPY remained on the weaker side throughout the day, with the market paying little attention to the latest inflation data and repeated intervention rhetoric from Japanese officials. June CPI came in as expected, while flash PMIs continued to point to steady expansion, but neither was enough to shift expectations for BoJ policy. Finance Minister Katayama again reiterated that authorities stand ready to respond to excessive FX moves, although the lack of any concrete action kept the Yen under pressure.

Data:

  • Japanese Inflation Rate YY (Jun) 1.7% vs. Exp. 1.7% (Prev. 1.5%)
  • Japanese Core Inflation Rate YY (Jun) 1.6% vs. Exp. 1.6% (Prev. 1.4%)
  • Japanese Inflation Rate Ex-Food and Energy YY (Jun) 1.7% vs. Exp. 2% (Prev. 1.8%)


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SWISS FRANC

The currency continued to struggle as markets favoured higher-yielding alternatives, with the lack of domestic catalysts leaving CHF vulnerable to broader positioning flows.