Forex▼ Bearish
Oil Tumbles Below $84 as US-Iran Talks Resume
Brent crude falls $6 after Trump confirms Iran talks resume Monday. Euro area CPI edges higher, dollar weakens, and Japan intervenes on yen for first time in 30 years.
Continue with
Oil prices tumbled more than $6 a barrel over the weekend, with Brent crude trading just below $84 this morning after closing near $90 on Friday. The trigger was Trump's confirmation that negotiations with Iran would resume Monday, after he called off what he described as "the biggest attack since World War II" at the request of Gulf allies.
Trump declined to set a deadline or disclose the location and participants. The sharp drop in crude supported risk appetite across markets this morning, with European and US futures pointing to opening near fresh all-time highs.
The Iran talks are the week's biggest geopolitical catalyst, but the macro calendar is dense. Markets brace for the US July jobs report Friday, where AlphaScala expects non-farm payrolls of +70,000 and the unemployment rate steady at 4.2%, near consensus. The week also brings the ISM manufacturing index for July, the final euro area PMI prints, and Swedish inflation data Thursday.
Euro area inflation came in slightly above expectations for July. Headline hit 2.9% year over year (consensus 2.9%, prior 2.8%), while core climbed to 2.5% (consensus 2.4%, prior 2.4%). The upside in core appeared partly driven by accommodation prices in France -- likely temporary, economists said. Selling price expectations have declined to below their March level, making it hard to trace contagion into broader price pressures.
In the US, the second-quarter Employment Cost Index grew slightly faster than expected at 0.9% quarter over quarter (consensus 0.8%), though the reading had little market impact. The same went for comments from three hawkish FOMC dissenters last week -- Logan, Hammack and Kashkari -- who each warned about persistent inflation overshoot without further tightening. Non-voter Barkin described the July rate decision as a "close call." Chair Warsh is reportedly planning to propose reducing the annual number of FOMC meetings from eight to four.
Broad dollar weakness continued from last week, with the DXY index hitting its lowest level since mid-June. Yield curves steepened and EUR/USD pushed above 1.15 as uncertainty about the FOMC's policy direction grew.
USD/JPY extended its sharp decline, falling below 157 after Japan's currency chief Mimura said further joint intervention with the US Treasury "remains firmly on the table" and will continue without hesitation if required. The Ministry of Finance confirmed the coordinated yen-support intervention Friday -- the first in nearly 30 years.
The Bank of Japan left its policy rate unchanged at 1.00% in an 8-1 vote, reiterating its intention to "continue to raise the policy interest rate and adjust the degree of monetary accommodation." The board flagged the Middle East, the yen and global AI-related demand as key risks, while seeing overall growth risks as balanced. AlphaScala pencils in the next BoJ hike in the fourth quarter, followed by another in the second quarter of 2027.