Japanese Yen Intervention Shakes Currency Markets

Japanese authorities were suspected of conducting a massive yen-buying intervention, causing the currency to surge sharply against the US dollar. This move came as data showed an acceleration in Tokyo's core inflation for July and ahead of a Bank of Japan policy meeting where officials are expected to maintain rates but may signal a more hawkish outlook.

US Dollar Weakens on Economic Data, Supporting Gold

The US Dollar fell sharply after economic growth figures for the second quarter missed expectations, even with underlying support from consumer and AI-related spending. This dollar weakness helped gold prices climb as traders pared back bets on future Federal Reserve interest rate hikes. The move also contributed to rallies in other major currencies against the dollar, including the British Pound, Australian Dollar, and Swiss Franc.

Geopolitical Tensions in the Middle East

Geopolitical developments in the Middle East remained a focus for markets, including reports of a potential agreement for the disarmament of Hamas. Separately, tensions between Iran and the United States were noted following an incident, while Saudi Arabia announced the formation of a new international maritime defense alliance to protect navigation in the Red Sea.

China's Economic Outlook and Currency Strength

In China, a recent Politburo meeting did not signal major new stimulus, instead emphasizing the execution of existing fiscal support for infrastructure projects. Analysts noted that China's large trade surplus, increasingly driven by green technology exports, continues to provide support for a gradual appreciation of the yuan against the US dollar.