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July was a relatively calm month in the foreign exchange market before activity exploded into life at the eleventh hour.
Uncertainty surrounding last week's Federal Reserve meeting was unusually high. In the end, not only did the Fed not raise rates, but chair Warsh sounded rather dovish.
The Iran war has dragged on for longer than markets had anticipated in the spring, which is creating a challenging backdrop for emerging market currencies.
Markets are finally beginning to take notice of the renewed US-Iran hostilities and surge in oil prices, which last week jumped back above $100 a barrel.
The collapse of the ceasefire between Iran and the US, and the escalating military conflict in the Middle East, has so far failed to shake markets from their summer torpor and currencies are no exception.
The latest flare up in tensions between the US and Iran failed to trigger any significant safe haven flows in currency markets, or in any financial markets for that matter.
The dollar rally that has lasted since early May seems to be petering out.
A pull back in risk sentiment saw stocks markets drop globally last week, led by the big winners of the last few years, technology companies.
The Fed, now under the stewardship of the new chair Kevin Warsh, seems considerably more concerned about inflation than markets expected, if his first press conference at the helm is anything to go by.
Investors will be forgiven for having half an eye on the sports pages this month as the 2026 FIFA World Cup kicks off, bringing the usual mix of drama and excitement. That said, financial markets are set to serve up a spectacle of their own.
Financial news last week was dominated by the sharp sell off in bond markets worldwide.
The war in Iran, and the subsequent heightened geopolitical risk premium and acute volatility in commodity markets, make for a challenging backdrop for FX forecasting.
