Overnight, while the US slept

A stagflation scare, not a growth scare: Friday closed the week ugly on the data and only mildly ugly on the screen. US retail sales fell −0.6% m/m in July — the steepest drop since May 2025 against a +0.1% consensus — and the University of Michigan's preliminary August consumer sentiment index collapsed 4.2 points to 51.0 versus 55.0 expected. Equities took it in stride rather than in panic: the S&P 500 slipped −0.2% to 7,785.76, the Nasdaq −0.3% to 26,729.16, the Dow −107.58 points (−0.2%) to 53,732.41. All three still banked a third consecutive weekly gain on the S&P and Nasdaq. That's a market that doesn't yet believe the consumer data.

Rates & DXY: the 10-year Treasury closed at 4.68%, up +5bp on the day despite the weak data, while the 2-year sat at 4.17%. That's a 2s10s spread of +51bp and steepening — and the shape is the message. The long end is pricing inflation; the front end is pricing a central bank that can no longer follow through. Odds of a September Fed hike fell to 32% from 35%. The DXY (dollar index — the greenback measured against a basket of major currencies) fell −0.27% to roughly 99.8, a second straight down session.

The dominant driver — Hormuz, still shut: US–Iran talks over reopening the Strait of Hormuz remain deadlocked, and weekend shipping traffic through the waterway thinned further to about six vessels a day from eleven. Brent crude sits above $88/bbl. This is textbook supply-side inflation shock (prices rising because supply is choked, not because demand is hot) — and normally that chain runs: oil up → inflation sticky → central bank turns hawkish → real rates (interest rates after subtracting inflation) rise → dollar bid → gold lower.

But the chain is broken this time, and that's the whole trade. The bearish leg only works if a central bank actually reacts. Friday's data says this one can't. Three FOMC members dissented for a hike in July and the median official still pencils in one 2026 hike — but you don't tighten into a −0.6% retail sales print and a 51.0 sentiment reading. So you get the inflation without the offsetting rise in real rates. That is the single most gold-bullish macro configuration there is, and it's why my directional call on gold flips today.

Gold: trading 4374.01 / 4374.09. Day range 4372.37–4380.16; Friday's high/low 4397.07 / 4310.93. Friday was a violent two-way session — bullion was smashed down to 4310 in the European morning, then ripped $86 off the low to 4397 the moment the US consumer data hit. How a market reacts to news tells you more than the news. Gold's answer to "the Fed can't hike" was to buy it with both hands. It has since settled into a very tight Monday open, holding almost all of that rally — which is constructive, but it also means I'm not being offered a bargain here.

Crypto: Bitcoin 62,772.75 (RSI M15 23.9 — deeply oversold, ATR $94.39); day range 62,665.85–63,009.05, prior-day high/low 63,303.65 / 62,871.35. Bitcoin has sliced clean through the weekend low and sits roughly 48% below its all-time high, with US spot ETFs posting a third consecutive outflow day (−$57.63m). This is a flow problem, not a macro one. Ether 1873.67 (RSI M15 32.1, ATR $3.74); day range 1865.33–1879.73, prior-day high/low 1889.08 / 1873.23 — also below the weekend low, also heavy.

Key FX:

• EURUSD 1.15691 — RSI 53.4 (neutral), ATR 3.1 pips. Day H/L 1.15696 / 1.15625, Friday H/L 1.15854 / 1.15253. Gapped a touch lower at the open and has already reclaimed it; the euro is grinding up on dollar weakness, not euro strength.
• GBPUSD 1.35372 — RSI 50.9, ATR 4.7 pips. Day H/L 1.35446 / 1.35298. Sterling gapped up 9 pips and gave most of it back. UK CPI Wednesday is the week's sterling event.
• USDJPY 159.320 — RSI 51.1, ATR 3.8 pips. Day H/L 159.401 / 159.290, Friday H/L 159.526 / 158.603. Uncomfortably close to the 160 handle where Japan's Ministry of Finance has historically stepped in to defend the yen (MOF intervention — the Japanese Treasury buying yen directly). Japan's Q2 GDP lands at 09:50 AEST.
• AUDUSD 0.70846 — RSI 53.3, ATR 3.2 pips. Day H/L 0.70866 / 0.70771. Waiting on China's activity data at midday.
• NZDUSD 0.58896 — RSI 51.7, ATR 3.3 pips. Day H/L 0.58928 / 0.58814. Quietly firm, no catalyst until the US session.
• USDCHF 0.81322 — RSI 54.3, ATR 5.3 pips. Notable: the franc was aggressively bid at the Monday open (USDCHF gapped 21 pips lower to 0.81120) before fully recovering. Somebody wanted haven protection over the weekend and then thought better of it.

Cross-asset snapshot:

Asset	Now	vs Prior Close	Vector
S&P 500	7,785.76	−0.2% (Fri)	Cautious, not risk-off
US 10Y	4.68%	+5bp (Fri)	Inflation-led, long-end hawkish
US 2Y	4.17%	Softening	Hike odds cut to 32%
DXY	~99.8	−0.27% (Fri)	USD soft
Gold	4,374.05	−$23.02 from Fri high 4,397.07	Bullish — policy channel blocked
Bitcoin	62,772.75	−$530.90 from prior-day high 63,303.65	Weak, oversold
Brent	~$88.00	Firm	Hormuz supply squeeze

Monday session: normal liquidity, no holiday. Asia carries the morning on Japan GDP and China activity data; the US day is light until Empire State manufacturing tonight.

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