US Dollar Holds Steady as July Inflation Matches Consensus

The US dollar remained within familiar trading ranges after July's inflation figures aligned precisely with market expectations. Both headline and core American inflation data released on 12 August came in as forecast, producing relatively little volatility—compounded by the seasonal lull that typically characterizes mid-August trading.

Annual headline inflation for July edged down slightly to 3.4%, still well above the Federal Reserve's 2% longer-run target but in line with broad market consensus. The month-over-month increase in fuel prices was lower than in June, though the difference between the two months was not substantial. Most other major components of headline inflation, including rents and shelter costs as well as food prices, remained at or near their previous month's levels. With all annual and monthly readings for both core and non-core inflation meeting expectations, overall volatility surrounding the release was notably lower than the historical average around inflation prints.

The combination of a weaker Non-Farm Payrolls (NFP) report and declining inflation for July has pushed more hawkish Federal Reserve expectations into the background for the time being. With the labor market potentially slowing—or at minimum showing no signs of overheating in recent months—and inflation falling for two consecutive months while the annual headline figure remains below the benchmark interest rate, there appears to be no immediate pressure on the Fed to raise rates at its September meeting.

As of 13 August, approximately 64% of market participants anticipate another rate hold by the Federal Reserve on 16 September, according to CME FedWatch, which derives implied probabilities from Fed funds futures pricing. A slim majority of roughly 52% expects at least one rate hike by 28 October, while the implied probability of rates remaining on hold through 2027 has risen to around 28%.

Traders may now look ahead to the release of the Federal Reserve's meeting minutes on 19 August. However, these are unlikely to deliver significant new information, as the meeting took place before the most recent weak NFP and inflation data emerged. Absent major geopolitical developments in the Gulf or a clear shift in broader market sentiment, most major markets are expected to remain in a summer pattern characterized by relatively low activity and volatility over the coming days.

GBP/USD Tests Resistance Near $1.35

Slightly stronger-than-expected British GDP figures released on 13 August helped cable (GBP/USD) hover near familiar levels just below $1.35. While the latest NFP report was broadly negative for the dollar, the in-line US inflation print on 12 August generated little chart movement. With both the Fed and the Bank of England expected to keep rates in the 3.5–3.75% range for the near term, monetary policy offers no obvious directional catalyst at present. Traders will likely need to wait until early next month for materially clearer signals on the next moves in interest rates.

The $1.35 level remains a probable resistance zone that the price is currently testing. However, a decisive breakout in mid-August appears unlikely absent surprising news. Volatility as measured by the Average True Range (ATR) is near its minimum, and volume remains seasonally low, though the slow stochastic indicator is signaling overbought conditions. Should a break above $1.35 materialize further out, the next target could be in the vicinity of May's highs near $1.36.

The principal moving averages have clustered closely together below the price as both volatility and momentum have declined throughout August. The value area between the 100 and 200 Simple Moving Averages (SMAs) around $1.343 serves as a possible support level, while the 23.6% weekly Fibonacci retracement near $1.335 may provide stronger support. Given seasonal conditions, an upward breakout around the release of upcoming British labor data and inflation figures is questionable unless those readings prove genuinely surprising.

Australian Dollar Holds Near Dynamic Resistance

The Australian dollar has broadly maintained its strength since early August after the Reserve Bank of Australia (RBA) signaled its readiness to raise rates further if necessary. A cumulative 0.75% in rate hikes so far in 2026 means that monetary conditions in Australia are overall restrictive, and the Aussie dollar appears to be benefiting from carry-trade dynamics—where investors borrow in lower-yielding currencies to seek returns in higher-yielding ones—against other major currencies. With no imminent threats to trade stability, AUD's fundamental backdrop appears solid, though traders will continue monitoring any escalation of hostilities in the Gulf that could push AUD/USD lower.

The 100 SMA around 70.6 US cents remains the key dynamic resistance level that the price has tested for several days without a successful break. As with cable, a mid-August breakout higher seems doubtful given very low volume and overall activity. The recent chart pattern of AUD/USD is broadly similar to that of cable, though the fundamental context differs—suggesting that when volume returns at the end of August or early September, the Australian dollar may present a more favorable opportunity than sterling against the US dollar. However, this assessment depends on the fundamental factors noted above.

The May high on this chart sits more than two cents above the current price, meaning a confirmed break above resistance could offer a favorable risk-reward profile for buyers. The 100% weekly Fibonacci retracement just below 69 cents appears to mark a strong, potentially broad support zone. In the near term, however, the 70-cent level is a more probable source of a bounce if the price retraces, serving as both a psychological area and a level near the 200 SMA.

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The opinions expressed in this article are personal to the author and do not represent those of Exness. This is not a recommendation to trade.