DXY Slumps Below 100 as Suspected Yen Intervention Rattles Markets

The US Dollar Index closed the last completed session at 99.7310, down 0.89%. The drop was led by USD/JPY, which fell 2.72% to 159.00 after what desk reports describe as suspected official Japanese intervention (unconfirmed by Japan's Finance Ministry). The dollar's slide came alongside the Federal Reserve's July 29 hold at a 3.50%-3.75% target, a decision that saw three FOMC members dissent in favour of a hike rather than a cut — keeping the 2026 policy debate framed around whether the Fed hikes, not whether it cuts. Equities rallied on the session (S&P 500 +1.60%, Dow +1.07%, Nasdaq +0.82%) and the VIX fell 6.37% to 18.95, while gold added 0.89% to 4102.62.

US Treasury yields rose across the curve even as the dollar fell: the 10-year added 4.9bp to 4.671%, the 30-year 7.1bp to 5.214%, the 5-year 3.0bp to 4.382% and the 3-month 1.7bp to 3.675%. The Fed's July 29 hold at 3.50%-3.75% came on a 9-3 vote under Fed Chair Kevin Warsh, with three members dissenting in favour of a 25bp hike; the Fed offered no clear forward guidance. Elsewhere, the Dallas Fed's Trimmed Mean inflation gauge read 1.4%, down from 2.7% in May, and the Atlanta Fed's GDPNow initial Q3 estimate stands at 5.0%. A White House economic adviser said inflation is continuing to ease.

EUR/USD rose 0.55% to 1.1530, extending its rally after the euro area's flash Q2 GDP beat revived ECB hike bets. GBP/USD gained 0.78% to 1.3472 on a hawkish 6-3 Bank of England hold at 3.75%, with three MPC members backing an immediate hike to 4.00%. USD/JPY fell 2.72% to 159.00 on suspected Japanese intervention. USD/CAD eased 0.37% to 1.3995, a new low back to June 17, as broad dollar softness followed the Fed's hold.

EUR/USD's rally to 1.1530 (+0.55%) tracks Eurostat's flash Q2 GDP estimate for the euro area, released Thursday, showing growth of 0.4% quarter-on-quarter versus a 0.2% consensus (per investinglive). Spain led among major economies at 0.7% q/q, with Germany, France and Italy each at 0.2%, while Ireland posted the bloc's highest reading at 3.9%. The beat, alongside a firmer German inflation print (July preliminary CPI +2.8% y/y versus 2.7% expected), has revived bets on a second ECB rate hike, potentially in September, following June's hike. That outweighed a divided Fed hold and contested US-Iran tensions. Today's calendar brings the euro area's flash HICP inflation print for July, forecast at 2.9% headline and 2.4% core, alongside French and Italian national releases that could move the pair further.

Friday's calendar is dominated by inflation data. Japan's BoJ press conference (high impact) and housing starts (forecast 12.7%, previous 33.9%) lead the Asian session. Europe brings French preliminary CPI (forecast 0.3% m/m, previous -0.2%), German unemployment change (forecast 5K, previous -1K), and euro-area flash CPI (forecast 2.9% y/y headline, 2.4% core) alongside Italian preliminary CPI (forecast 0.3% m/m). The UK sees Nationwide house prices (forecast 0.1% m/m) and MPC member Pill speaking. Canada's GDP (forecast 0.2% m/m, previous 0.5%) lands high-impact. The US session brings the Employment Cost Index (forecast 0.8% q/q), Chicago PMI (forecast 55.9, previous 56.7), and the revised University of Michigan consumer sentiment (forecast 53.9) and inflation expectations (previous 4.2%).