What is the ECB deciding on today, and why does it matter for EUR/USD?
The ECB announces its rate decision today, July 23, at 13:45 CET, with President Christine Lagarde's press conference following at 14:30 CET. The bank has held its deposit rate at 2.25% since its last hike in June, and this is a non-projection meeting, so no fresh staff forecast comes with it. EUR/USD is trading near 1.14, with speculators still holding sizeable euro shorts heading into the announcement.
Today's ECB decision follows a June 11 hike to 2.25%. EUR/USD closed at 1.1411 on July 22, up slightly on the session. A hold with cautious language is the base case. Anything that reads as an opening for cuts later in the year would hit a currency already carrying crowded short positioning harder than a straightforward hold would.
Why is the yen sitting near a 40-year low against the dollar?
USD/JPY has hovered near 163 this week, a level not seen since the 1980s, even though the Bank of Japan raised its policy rate in June to its highest since 1995. The hike was supposed to narrow the gap with US rates. So far it has not been enough, and two separate forces are keeping the yen weak at the same time.
USD/JPY sits near 163 as of July 22, after the BOJ raised its policy rate to 1.00% in June. First is the rate differential: Japan's 1.00% against a Fed still at 3.50 to 3.75% is a wide gap for carry traders to fade. Second is the oil shock: Japan imports nearly all its energy, and the jump in crude prices tied to the wider Middle East conflict is a direct hit to its terms of trade. Markets are not yet convinced the BOJ will follow through with another hike, which is the missing ingredient for a real reversal.
What does today's oil inventory data actually say about supply?
US commercial crude stocks rose 2.0 million barrels in the week ended July 17, a build, not a drawdown, even with the total still below its five-year average. Gasoline and distillate stocks both rose too. The build cuts against the tightening narrative that has driven oil prices higher this month.
According to the EIA, commercial crude inventories rose to 411.7 million barrels, 6% below the five-year average. Gasoline stocks rose 0.8 million barrels and distillates rose 1.4 million barrels, both also below their five-year averages, while refinery utilization slipped to 96.1% of capacity, down 58,000 barrels a day from the prior week. Brent's rally this month has been a geopolitical story, strikes and shipping disruption, not a supply-shortage story. Those are different trades with different shelf lives.
Where do the major pairs stand right now?
Sterling is holding up against the dollar even with the Bank of England on hold. The Australian and New Zealand dollars are softer, and the Canadian dollar sits little changed. Taken together, the dollar is firm against the low-yielders and roughly flat against currencies backed by central banks still willing to defend a hold.
GBP/USD closed at 1.3372 on July 22, with the Bank of England holding at 3.75% after a 7-2 vote on June 18, two members having pushed for a hike to 4.00%. Its next decision is July 30. AUD/USD traded at 0.6993 and NZD/USD at 0.5819, both softer on the session, while USD/CAD sat near 1.407 with the Bank of Canada steady at 2.25%.
What does CFTC positioning data show about crowded shorts?
Speculative positioning across major currencies is unusually one-sided right now. Sterling and yen shorts both sit at or near record levels, alongside record kiwi shorts and multi-month-high loonie shorts. That kind of crowding does not predict a reversal by itself, but it does mean any surprise has more room to force a squeeze.
The most recent CFTC report, covering positions through July 14 and released July 17, showed sterling shorts at a record net -156.3K contracts among asset managers and yen shorts near -155K, the largest since July 2024. New Zealand dollar shorts sat at a record -63.3K, Canadian dollar shorts at a 30-week high near -150.1K, and Swiss franc shorts near -37.4K. The next report is due July 24.
What are US Treasury yields signaling about the Fed's next move?
The 10-year yield just hit a two-month high, and markets have shifted from pricing Fed cuts to pricing a hike. That repricing is the backdrop for the entire FX picture above: a Fed leaning hawkish is why dollar shorts keep getting squeezed, and why the yen needs more than one BOJ hike to find real support.
The 10-year yield rose to 4.64% on July 22, a fresh two-month high. The Fed has held its target range at 3.50 to 3.75% since a unanimous vote on June 17, its first decision under Chair Kevin Warsh, with the next meeting on July 29 at 2:00 PM ET. With inflation running near 4.2%, markets are now pricing roughly one 25 basis point hike by October, a hawkish repricing from where expectations sat a month ago.
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