The week in one sentence: EUR and JPY selling pushed positioning toward fresh bearish extremes, WTI improved through short covering despite a sharp price decline, and VIX shorts retreated as volatility moved higher.
The US Dollar (USD) has traded mostly lower throughout the week, briefly testing six-week lows despite prevailing risk aversion, which has been driven by unabated geopolitical tensions in the Middle East.
The EUR/USD pair closes July with modest gains near the 1.1500 mark, adding over 1.1% in the last trading week. Price action throughout the month was dull to say the least as investors remained clueless, although the pair managed to hit 1.1530 ahead of the close.
Gold (XAU/USD) struggled to make a decisive move in either direction as the persistent US Dollar (USD) weakness was offset by a widening conflict in the Middle East.
The Federal Reserve (Fed), Bank of England (BoE) and Bank of Japan (BoJ) all kept interest rates unchanged this week. Anyone looking at the decisions alone might conclude that monetary policy had entered a quiet period.
Every year, August is associated with a sense of calm. Traders head off on vacation, trading volumes slow, and financial markets appear to shift into low gear. For many investors, the month feels like a pause, as if market risks themselves were taking a few weeks off.