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The Week in the Dollar

The dollar posted its worst week since early summer as a cooler-than-expected CPI print gutted the case for near-term Fed tightening, sending DXY down 0.83% to 98.84 and lifting every major G10 pair against the greenback.

The move was amplified by positioning ahead of next week’s Jackson Hole symposium — the first under Fed Chair Kevin Warsh — where markets are hunting for any signal on the September rate path. With inflation data now cooperating, traders pre-emptively sold dollars into the event risk.

Commodity markets added fuel. Gold surged 6.4% to $4,662, its strongest weekly gain in months, as real yields compressed on the softer inflation read. Oil ripped higher too — WTI +5.15% to $86.64, Brent +6.04% to $93.87 — driven by renewed Strait of Hormuz tensions and Gulf supply disruptions. That combination of falling US yields and rising energy prices created a one-way street for the commodity-linked currencies and traditional safe havens alike.

Key Pair Breakdown

USD/NOK -2.29% to 9.287 — The week’s standout move. The krone benefited from a double tailwind: broad dollar weakness plus a 5-6% surge in crude prices on Middle East supply fears. Norway’s petroleum-heavy economy is a direct beneficiary of higher energy prices. Norges Bank’s decision to hold rates at 4.25% earlier in August kept the yield backdrop supportive. A push below 9.25 would mark the lowest level since spring.

USD/CHF -1.63% to 0.8008 — The franc rallied hard as safe-haven flows combined with dollar liquidation. Gold’s 6.4% weekly surge ran in lockstep with CHF strength — both assets are absorbing the same geopolitical and rate-repricing flows. Sub-0.80 is the level to watch; a sustained break there opens up territory not seen since late 2024.

AUD/USD +1.57% to 0.7175 — The Aussie rode the risk-on commodity wave higher despite copper finishing the week flat at $6.58. Iron ore sentiment and the broader “sell dollars, buy risk” tone did the heavy lifting. The 0.72 handle is now in range for the first time since the Q2 pullback.

NZD/USD +1.47% to 0.5977 — The kiwi tracked the Aussie move almost tick-for-tick, benefiting from the same dollar-negative flows. NZD/JPY gained 1.29% to 94.99, reflecting strong risk appetite across the crosses. A clean break above 0.60 would be technically meaningful.

EUR/USD +1.24% to 1.1678 — The euro climbed steadily through the week as dollar selling broadened. The pair entered the week near 1.1590 and ground higher without a meaningful pullback. With Jackson Hole ahead, 1.17 is the near-term pivot — a dovish Warsh speech could open the door toward 1.18.

AUD/JPY +1.20% to 113.96 — A pure risk-appetite cross, AUD/JPY’s rise confirmed that carry trades are back in favor. The yen stayed relatively contained on the week (USD/JPY -0.31% to 158.94), so the cross move was mostly AUD-driven rather than a yen unwind.

USD/CAD -1.18% to 1.3763 — The loonie strengthened on the oil rally, though it underperformed the krone. CAD tends to lag NOK in oil-driven moves because Canada’s economy is more diversified. A break below 1.37 would confirm the trend shift.

GBP/USD +1.17% to 1.3648 — Sterling tracked the euro higher with a marginally wider gain, keeping EUR/GBP pinned at 0.8561 (essentially flat at +0.14%). Cable’s move was dollar-driven rather than a sterling story. The 1.37 level is the next test overhead.

Week Ahead Setup

Jackson Hole (August 27-29) dominates the calendar. Chair Warsh’s keynote will be dissected for any shift in the Fed’s reaction function after this month’s soft CPI. If Warsh leans dovish, this week’s dollar selloff extends and EUR/USD likely tests 1.18. If he pushes back on rate-cut pricing, expect a sharp short-covering squeeze in the dollar — USD/NOK and USD/CHF would snap back fastest given how stretched they are.

Friday’s US PCE deflator (July) is the data anchor. After CPI already came in soft, a confirming PCE print would seal the September cut narrative. A hot read would catch the market offside given how aggressively it sold dollars this week.

Watch USD/NOK at 9.25, USD/CHF at 0.80, and EUR/USD at 1.17 — those are the breakout-or-rejection levels that will define whether this week’s moves have legs or were just pre-Jackson Hole positioning.

Bottom Line

The dollar is on the back foot heading into the most important central-bank event of the summer, with soft inflation data, surging commodities, and geopolitical risk all pulling in the same direction. USD/CHF pressing below 0.80 is the pair traders are watching most closely — it’s where rate repricing and safe-haven demand converge, and a sustained break would signal that the market has made up its mind about September well before the Fed has.

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