Dollar softens, Yen soars on BOJ normalization bets | FX ResearcThe US dollar got off to a soft start to the week, though thinner summer trading conditions have restrained activity across G10 and emerging markets. The Japanese yen stole the spotlight in G10 after the Ishiba coalition lost its upper house majority, fueling speculation about potential Bank of Japan policy normalization and political instability, which likely drove yen demand.
Meanwhile, positive market sentiment tied to a possible Trump–Putin meeting was overshadowed by skepticism about the sustainability of equity and Bitcoin rallies, given the sharp rise in US equity futures and bond market trends.
Political pressure on the Federal Reserve is intensifying, with Treasury Secretary Bessant questioning the Fed's credibility while also advocating for US–China trade talks and hinting at tougher terms for Europe. Despite calls from the administration and GOP figures for lower interest rates, the Fed anticipates price increases in August data.
In Canada, the Bank of Canada survey pointed to trade uncertainties and weak demand curbing inflation, with tariffs impacting corporate margins rather than consumers. On the fiscal side, the CBO estimates Trump’s tax cuts will add $3.44 trillion to the US deficit over the next decade—a significant but slightly reduced figure compared to earlier projections.
Exclusive FX research from LMAX Group Market Strategist, Joel Kruger
