Daily Market Report
08/18/2026
EUR/USD ranged in the mid to high 1.15s overnight. The EUR/USD pair depreciates as the US Dollar (USD) holds ground on safe-haven flows amid escalating geopolitical tensions between the US and Iran. US President Donald Trump stated he has no interest in renewing the expiring agreement with Iran, pointing to the active naval blockade of Iranian ports as leverage and reiterating his intention to declare the vital waterway as total American territory.
However, the Greenback may struggle as hawkish expectations surrounding the Federal Reserve fade. A recent, unexpected decline in July US Nonfarm Payrolls alongside modest consumer price inflation figures has weakened the case for imminent monetary tightening. Consequently, CME FedWatch Tool data shows the probability of a Fed rate hike at the next meeting has fallen to 36.6%, down from 48.4% a week ago.
Analysts note that the US Dollar has “rebounded modestly today with the focus very much on the deterioration in bond market sentiment.” They highlight that “UST bond yields have moved further sharply higher and the 30-year yield is now 25bps higher since the FOMC meeting on 29th July,” with the 30-year “at 5.32% this morning,” marking “the highest since 2007.” MUFG/BTMU add that “curve steepening is showing clear momentum in the US and elsewhere,” underscoring the shift in global duration dynamics that is underpinning the Dollar’s latest move.
The British Pound (GBP) is down 0.1% to near 1.3530 against the US Dollar (USD) during the European trading session on Tuesday. The British currency comes under pressure after the release of the United Kingdom (UK) employment data for three months ending June.
Analysts characterize the latest UK labor figures as offering “nothing particularly earth-shattering,” but still reinforcing a picture of a cooling jobs market. They note that “payrolled employment is down a touch,” while cautioning that this headline masks “big differences between government (which is still actively hiring), consumer services (where job numbers are consistently falling and the pace of decline is getting worse) and the remaining private sector, which is flatlining.”
Going forward, investors will focus on the UK Consumer Price Index (CPI) data for July, which will be released on Wednesday. Investors will pay close attention to UK inflation to get fresh cues regarding the BoE’s monetary policy outlook.
The Japanese Yen (JPY) underperforms its major currency peers on Tuesday, with USD/JPY trading 0.16% higher at around 159.70 during the European trading session. The Japanese currency is under pressure as financial markets doubt the Bank of Japan (BoJ) to hold its hawkish policy stance amid growing economic concerns.
Economists note that Japan’s latest GDP release undershot expectations, with “headline growth missed consensus, with consumption and capex—the two drivers we had expected to support growth—both disappointing.” They add that the inflation backdrop offers some support to tightening prospects, as “the higher GDP deflator should support near-term BoJ hike expectations,” but caution that “if weakness in consumption and capex continues, it would raise concerns over a faster and higher hiking path.”
Source: FX Street