A mixed-to-defensive tape closed the week as USD/JPY collapsed through 160, softer US inflation met weak GDP, and Strategy's Q2 loss underlined the bitcoin drawdown.
The week ended with cross-asset signals pulling in different directions. Equities firmed into Friday's close — the Dow added 1.19% on Thursday — but the FX tape told a more defensive story, headlined by a violent unwind in USD/JPY. Softer US inflation, a weaker-than-expected Q2 GDP print, and a split Bank of England vote framed a market that read the macro data as cooling rather than collapsing, while crypto traders spent the week digesting Strategy's second-quarter results and a stalled Washington rulebook. We'd characterise the overall regime as mixed, with a clear rotation out of the recent yen carry trade and into rates-sensitive equities.
The yen unwind was the story of the week
The standout move came in USD/JPY. The pair plunged from a session high of 163.70 to below 160.00, accelerating sharply during US trading hours, leaving traders debating whether Japanese authorities had stepped in or whether the move was pure positioning ahead of Friday's Bank of Japan decision.
The technical damage was significant. USD/JPY's steep decline suggests that a medium term top is probably formed at 163.97, with immediate focus now on the rising channel floor near 158.74. The cross-yen pairs moved in sympathy — GBP/JPY's decline from 219.56 accelerated, putting focus on 212.26 support, and EUR/JPY's accelerated decline suggested the corrective pattern from 187.93 has finally started its third leg, with deeper losses possible to 180.78 support.
Why it mattered: the move squeezed carry-trade positioning that had been building for months, and it landed less than 24 hours before the BoJ's policy rate decision and Outlook Report, both scheduled for 22:30 GMT+3 on Friday. Options desks were repricing overnight vol into that event; spot vol readings on JPY crosses widened noticeably during the US session.
US macro softened, but not enough to shift the Fed
The US data slate was the other big driver. GDP rose just 1.5% in Q2 according to the first BEA estimate, a far weaker pace than expected despite a pickup in consumer spending and solid business investment. Alongside the growth miss, PCE inflation data conformed to year-on-year expectations, and separately traders flagged the print as the first monthly drop in six years for the Fed's preferred inflation gauge.
The combination — weaker growth, cooler inflation — pulled some heat out of the rate curve. Bitcoin firmed toward $65,000 on Thursday as softer economic data eased September Fed hike fears, with spot volume near multi-year lows. But the Fed itself did not move. Rates were held steady on Wednesday, and political and economic developments are pushing mortgage rates higher, with the 30-year touching its highest level in a year.
Chair Warsh's credibility trade also featured. Warsh insists the Federal Reserve will do whatever it takes to reduce US inflation to its 2% target, but investors aren't buying it — a scepticism that showed up in a firmer gold complex and a softer real-yield read across the week.
Central bank divergence: BoE splits three ways
Across the Atlantic, the Bank of England provided its own volatility. The BoE kept Bank rate unchanged at 3.75%, as widely expected. Three MPC members now call for a hike. The BoE now recognises that the risk to inflation is less imminent and has lowered its inflation outlook.
That three-way split — hold now, but with a hawkish minority and softer inflation guidance — is precisely the kind of setup that widens intraday ranges. The FTSE 100 slipped on the decision, and cable traded a wider range than in recent sessions. The BoE also flagged that policy outlook is highly dependent on the situation in the Middle East, tying UK rate expectations back to the crude complex.
On the euro side, EUR/USD tried to reclaim technical ground. EUR/USD's break of 1.1499 support turned resistance argues that the fall from 1.2081 might have completed as a three-wave correction at 1.1323, with intraday bias back on the upside for the 1.1621 cluster resistance. Friday's flash CPI at 05:00 GMT+3, with core forecast at 2.4% and headline at 2.9%, was the near-term catalyst.
Crypto: Strategy's Q2, Coinbase's mix shift, and a stalled bill
Crypto spent the week absorbing corporate news rather than a fresh directional macro catalyst. Strategy posted an $8.2 billion Q2 loss as bitcoin holdings increased 11%, with the price of bitcoin more than 40% lower at the end of Q2 versus Q2 2025. The company also flagged defensive positioning: a $3.75 billion cash reserve to support preferred stock payouts following the launch of its BTC monetization program.
Coinbase's print told a related story about the industry's revenue mix. 88% of its net revenue now comes from sources other than bitcoin spot trading, as its share of global crypto volume grows. The shares slipped on the release despite the broader engagement metrics.
Regulation stayed a drag. The window to pass a comprehensive crypto market structure bill before the Senate breaks for a month-long recess is closing, with ethics a dividing issue for many lawmakers, and senators are trying again to see if they can get the president to sign off on revised ethics language.
On the tokenisation side, Aviva Investors launched a tokenized fund after Central Bank of Ireland approval, with an XRPL-based share class giving eligible investors blockchain-based access to a regulated US dollar liquidity fund — a data point institutional desks flagged as incremental progress rather than a regime change.
Energy: refinery runs at records, prices don't budge
Crude spent the week in a familiar range. US refineries are producing the most gasoline and diesel since before the pandemic lockdowns, and refining margins are running at record highs, but the world is still short on fuels. The dynamic that has defined the year continued: five months of mostly closed Strait of Hormuz have not sent oil prices spiking to $150 or $200 per barrel as many analysts warned in March, and even as more than 10% of global crude oil supply disappeared from the market, oil didn't hit record highs.
Geopolitical headlines stayed active. Iran fired ballistic missiles at American bases in Jordan late on July 28, in what appeared to be the first time Tehran initiated an attack on US targets since the war began in late February. The market reaction in crude was measured relative to prior escalations — a signal that traders have partially normalised the geopolitical premium.
Looking ahead
Two events sit directly ahead of the weekend and will shape Monday's open. First, the BoJ policy rate decision, monetary policy statement and Outlook Report at 22:30 GMT+3 on Friday — arriving into a yen tape that has just broken key support. Second, euro-area flash CPI at 05:00 GMT+3, with the market watching whether the headline reading confirms the 2.9% forecast or surprises in either direction. US employment cost index at 08:30 GMT+3 and the revised University of Michigan sentiment and inflation expectations at 10:00 GMT+3 round out the North American session.
As always, this is observational commentary on how markets processed the week's information — not a view on what happens next. If you want to review your exposures into the weekend, our execution desk is available.
For information only. This is market commentary and education, not investment advice. Figures are as at the time of writing.