The US dollar remained close to a six-week low on Wednesday, while gold reached a one-month high and oil prices extended their sharp retreat. Government bonds advanced as falling energy prices reduced inflation fears and lowered expectations of another Federal Reserve rate increase.
By FinanceMarkets.info — August 5, 2026
Global currency, commodity and bond markets were driven by one dominant theme on Wednesday: the possibility of diplomatic progress in the Middle East and the reopening of the Strait of Hormuz.
Oil prices continued to fall after Tuesday’s decline of more than 5%, easing concerns about another wave of global inflation. The move supported government bonds, pushed sovereign yields lower and weakened expectations that the US Federal Reserve would raise interest rates in September.
Gold and silver emerged as the day’s strongest-performing major commodities. A softer dollar, declining bond yields and continued geopolitical uncertainty attracted buyers to precious metals.
Market snapshot
| Asset | Approximate level | Daily direction |
|---|---|---|
| US Dollar Index | 99.85 | Broadly unchanged, near six-week low |
| EUR/USD | $1.153 | Slightly higher |
| GBP/USD | $1.346 | Slightly higher |
| USD/JPY | ¥157.6 | Yen marginally stronger |
| NZD/USD | $0.586 | Around -0.5% |
| Brent crude | $79.04 per barrel | Lower |
| WTI crude | $75.19 per barrel | Lower |
| Spot gold | $4,175 per ounce | Around +2.4% |
| Silver | $61.76 per ounce | Around +3.8% |
| Copper | $6.64 per pound | Around +0.4% |
| US 10-year Treasury yield | 4.60% | Lower |
| German 10-year Bund yield | Around 3.10% | Lower |
| Japanese 10-year yield | 2.81% | Lower |
Indicative market levels available during European trading on August 5. Foreign-exchange, commodity and bond prices change continuously.
Forex: dollar remains near six-week low
The US Dollar Index traded around 99.85, remaining close to its lowest level in six weeks.
Lower oil prices reduced concerns that energy costs would create another inflationary shock in the United States. Traders consequently scaled back expectations of an additional Federal Reserve rate increase at the September meeting.
The implied probability of a September increase fell to approximately 57%–59%, compared with around 67% a day earlier.
The dollar’s decline was relatively controlled, however. Strong US corporate earnings and generally resilient economic data prevented a more significant sell-off ahead of this week’s employment indicators.
Investors are awaiting the ADP employment report and Friday’s official US payroll figures for further evidence about the direction of monetary policy.
Euro and sterling edge higher
The euro traded near $1.153 against the dollar, while sterling rose toward $1.346.
Neither currency recorded a major move, but both benefited modestly from the softer US dollar. The improvement in European risk appetite also provided some support after the STOXX Europe 600 reached a record closing high on Tuesday.
The euro remains sensitive to the interest-rate differential between the United States and the eurozone. A sustained fall in Treasury yields—or a clearer reduction in expectations for Federal Reserve tightening—could narrow that gap and provide additional support for the single currency.
Sterling traders are meanwhile monitoring the United Kingdom’s fiscal outlook and speculation that the government could use additional flexibility in its borrowing rules.
Yen stabilises after coordinated intervention
The Japanese yen strengthened slightly to approximately ¥157.6 per dollar.
Currency markets have remained on alert since Japan and the United States conducted a coordinated intervention to support the yen. Central-bank data indicated that Japan may have spent as much as $36.6 billion during the latest operation.
US Treasury Secretary Scott Bessent reiterated Washington’s support for Japan’s efforts to stabilise its currency. However, analysts remain sceptical about the intervention’s long-term effectiveness unless it is accompanied by higher Japanese interest rates or a more restrictive fiscal policy.
The Bank of Japan’s September meeting will therefore be an important test. Markets are increasingly considering the possibility of another rate increase if inflation and currency pressures persist.
The euro has also fallen sharply against the yen, retreating from approximately ¥187.4 last week to below ¥180 during Monday’s intervention-driven move.
New Zealand dollar leads the losers
The New Zealand dollar was the session’s weakest major currency, falling approximately 0.5% to around $0.586 against the US dollar.
New Zealand’s unemployment rate increased to 5.6% in the second quarter, its highest level since 2015 and above the 5.4% expected by economists.
Employment increased by 0.5%, but much of that growth reflected a higher labour-force participation rate. Annual wage growth remained subdued at approximately 2%.
The report suggested that the labour market has more spare capacity than previously estimated, reducing the likelihood that the Reserve Bank of New Zealand will pursue an aggressive tightening cycle.
Commodities: oil extends its decline
Brent crude fell by approximately $0.32 to $79.04 per barrel, while West Texas Intermediate declined by around $0.58 to $75.19.
Both benchmarks had already lost more than 5% on Tuesday.
Oil traders reacted to reports that mediation efforts involving Qatar could lead to progress in negotiations surrounding the US-Iran conflict and the reopening of the Strait of Hormuz.
Before the current disruption, the waterway handled approximately 20% of global oil and gas shipments. Any credible reopening agreement could restore supply routes and remove a substantial part of the geopolitical risk premium embedded in crude prices.
Nevertheless, Iran has disputed reports of direct negotiations with the United States. The disagreement means oil prices could remain volatile, with the potential for a rapid rebound if diplomatic efforts fail.
US inventory figures added some downward pressure. Industry data indicated that crude inventories increased by approximately 2.7 million barrels during the week ending July 31. Gasoline stocks also rose, while distillate inventories declined.
Gold reaches a one-month high
Gold was one of the day’s strongest-performing assets. Spot prices climbed approximately 2.4% to $4,175.53 per ounce, their highest level in a month.
US gold futures advanced around 2% to $4,235.30.
Gold benefited from three simultaneous factors:
- A weaker US dollar made the metal less expensive for buyers using other currencies.
- Falling Treasury yields reduced the opportunity cost of holding a non-yielding asset.
- Continuing uncertainty surrounding the Middle East maintained demand for defensive investments.
Gold’s strength alongside falling oil prices may appear contradictory. However, markets are distinguishing between the inflationary consequences of high energy prices and the broader geopolitical uncertainty supporting demand for precious metals.
The metal remains within the broad range of approximately $4,000 to $4,200 that has prevailed during recent weeks. A decisive break above the upper end of that range would probably depend on softer US employment data or a further decline in interest-rate expectations.
Silver outperforms gold
Silver rose approximately 3.8% to $61.76 per ounce, outperforming gold during the session.
The metal benefited from both defensive demand and its industrial applications. Improving sentiment toward technology and semiconductor stocks may also have provided support because silver is widely used in electronics, solar panels and advanced manufacturing.
Platinum increased around 2.6% to $1,779 per ounce, while palladium gained approximately 2.6% to $1,389—its highest level in two months.
Copper and iron ore remain comparatively stable
Copper traded near $6.64 per pound, gaining approximately 0.4%. The metal was supported by the recovery in Asian equities and renewed optimism surrounding AI-related infrastructure investment.
Demand for data centres, electricity networks and renewable-energy infrastructure continues to strengthen copper’s long-term investment case. However, short-term price movements remain sensitive to Chinese industrial activity and global manufacturing conditions.
Iron ore was broadly unchanged near $93.70 per metric tonne. The commodity has fallen almost 5% over the past month and approximately 7.5% over the previous year amid concerns about steel demand and China’s property sector.
Bonds: Treasury yields fall as inflation concerns ease
Government bonds advanced, causing yields to decline across several major markets.
The US 10-year Treasury yield fell by approximately three basis points to 4.60%, while the 30-year yield declined around 3.5 basis points to 5.15%. The two-year yield recorded a smaller decrease to approximately 4.19%.
The larger move in longer maturities reflected reduced concern that elevated energy prices would keep inflation persistently high.
The US 10-year yield nevertheless remains at a historically elevated level. It reached approximately 4.75% at the end of July, its highest level since January 2025, as investors considered the possibility of another Federal Reserve rate increase.
Wednesday’s rally therefore represents a partial reversal of the recent bond sell-off rather than a decisive change in the longer-term trend.
European and Japanese yields move lower
Germany’s 10-year Bund yield—the principal benchmark for the eurozone—fell toward 3.10%. The yield remains approximately 15 basis points higher than one month ago and around 45 basis points above its level a year earlier.
Large government borrowing requirements and increased infrastructure and defence expenditure continue to limit the potential for a sustained European bond rally.
Japan’s 10-year government bond yield declined by approximately 3.5 basis points to 2.81%.
Japanese yields remain exceptionally high by the country’s historical standards. A sustained move above 3% could create additional challenges for the government because of Japan’s large public-debt burden.
The Bank of Japan must consequently balance the need to support the yen and contain inflation against the potentially severe fiscal consequences of allowing borrowing costs to rise too quickly.
What markets are watching next
The immediate direction of currencies, commodities and bonds will depend on three principal catalysts.
First, investors need confirmation that diplomatic discussions can produce a credible agreement concerning the Strait of Hormuz. Failure would risk another sharp increase in oil prices.
Second, upcoming US employment data will influence expectations for the Federal Reserve’s September decision. Strong job creation could restore expectations of another rate increase, supporting the dollar and pushing bond yields higher.
Finally, traders will monitor the Japanese yen for signs of further intervention. Without a change in monetary or fiscal policy, the currency could return to pressure despite recent official action.
For now, the combination of lower oil prices, a softer dollar and declining bond yields is supporting both risk assets and precious metals. That unusual alignment reflects a market that is becoming more optimistic about inflation—but remains far from confident about geopolitics.
Sources: Reuters – Dollar near six-week low and yen stabilises, Reuters – Gold reaches a one-month high, Reuters – Oil extends its decline, Federal Reserve – Foreign exchange rates, Deutsche Bundesbank – German government-bond yields, Reserve Bank of New Zealand – Exchange-rate data.
