Monday set the tone. The yen weakened 1% to end the session at ¥159.29 per dollar, the worst performance among G10 peers, wiping out half of its recent intervention rally — a direct hit to the yen-short leg of our book, with CHF/JPY, GBP/JPY, AUD/JPY and NZD/JPY all printing window highs in the same stretch. On Tuesday the RBA left the cash rate target unchanged at 4.35 per cent while affirming it would do whatever was necessary to return inflation to the 2–3 per cent band, including lifting the cash rate further, which is precisely the conditioning language our Long AUD/CHF and Short GBP/AUD theses were underwritten on. Wednesday's US CPI landed exactly on consensus — core rose 0.2% on the month, with annual rates of 3.4% and 2.5%, both down a tenth from June and all in line — and Treasury yields fell across the board while traders cut September hike odds to 42%, yet Long USD/CHF still advanced, confirming this was a franc sell-off rather than a dollar rally. Finally, energy reversed hard: Brent closed Friday at $88.52, up 1.7%, after the US said its naval blockade of Iranian ports could continue "indefinitely", with both benchmarks up more than 5% on the week — rescuing the terms-of-trade leg of Long CAD/CHF.
How our views are tracking
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Long SGD/CHF — thesis strengthened Four consecutive higher closes carried the pair through its tactical objective with no SNB or MAS event in the window — exactly the mechanically-appreciating-numerator, administratively-pinned-denominator construction we described. |
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Long CAD/CHF — thesis strengthened, but stretched The failure of an Iran–Oman accord plus the EIA's view that Middle East output will not recover to near pre-conflict levels until early 2027, with Brent averaging $87 this year restored the oil leg — though the trade has now run far beyond its tactical case into a dated adverse catalyst. |
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Long AUD/CHF — thesis strengthened The binary event we flagged resolved our way: the guidance shift made clear risks are now tilted to the upside on inflation rather than two-sided, on a unanimous decision, locking the rate differential in place until late September. |
Invalidator watch
Three conditions that sat on Watch a week ago are now clear: the CAD/CHF oil test reversed as Iran and Oman failed to reach an agreement on reopening Hormuz despite earlier optimism, the AUD/CHF conditioning-clause test resolved at the 11 August meeting, and the USD/CHF long-end test eased as yields fell post-CPI. Only one invalidator remains breached — the yen positioning test underpinning our CHF/JPY short, where speculative shorts have kept shrinking rather than rebuilding, and that same test applies as one correlated block across our GBP/JPY, AUD/JPY and NZD/JPY shorts.
Next week
| Mon Aug 17 | Japan preliminary Q2 GDP; Canada July CPI | Affects: CHF/JPY, GBP/JPY, CAD/CHF |
| Tue Aug 18 | UK labour market report | Affects: GBP/AUD, GBP/CHF |
| Wed Aug 19 | UK July CPI; Section 338 tariffs on Canadian goods take effect | Affects: GBP/AUD, GBP/CHF, CAD/CHF |
| Thu Aug 20 | Australia July Labour Force | Affects: AUD/CHF, GBP/AUD |
| Fri Aug 21 | Japan July national CPI | Affects: all eight yen crosses |
Friday's Japanese CPI matters most to us. Inflation has run below the Bank of Japan's 2% target for six consecutive months as fuel subsidies and base effects limited conflict-driven cost pressure, while July producer prices are expected to feed into consumer inflation in coming months — with the positioning catalyst gone, a policy leg is the only route by which our yen shorts reload before the next full analysis.
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