Fed Minutes in Focus as Markets Turn Cautious

EUR/USD edges higher toward 1.1580 during early Asian trading on Wednesday as the US Dollar faces some pressure following softer US economic data and reduced expectations of a Federal Reserve rate hike. Markets now await further guidance from ECB President Christine Lagarde’s speech later in the day.

Market expectations for the Fed have shifted notably following weaker-than-expected July employment data, softer consumer inflation and disappointing Retail Sales. However, ongoing tensions between the United States and Iran could provide some support for the safe-haven Dollar and limit EUR/USD’s upside.

Meanwhile, markets are increasingly pricing in further tightening from the European Central Bank. The ECB Watch Tool shows a 90%–94% probability of a 25-basis-point rate hike to 2.50% at the September 9 meeting. ECB Chief Economist Philip Lane said Eurozone inflation at 3% remains too high, although he acknowledged that the economy continues to grow and inflation should return toward target over the coming year.

The Euro is also finding support from improving economic sentiment in Germany, with the August ZEW Expectations Index rising to 34 from 26.3 in July and exceeding the 30 consensus forecast.

Gold struggles to build on its modest recovery from a fresh weekly low reached during Wednesday’s Asian session, trading just below $4,350. The precious metal is finding some support as the US Dollar comes under renewed selling pressure, but gains remain limited as traders await the Federal Reserve’s July Meeting Minutes for fresh clues on the interest-rate outlook.

The FOMC Minutes will be closely watched amid renewed inflation concerns linked to rising energy prices. Crude oil has climbed to a nearly three-week high as tensions between the United States and Iran continue over the Strait of Hormuz. US President Donald Trump said Washington is not engaged in talks with Tehran and confirmed that the naval blockade of Iranian ports remains in place.

For Gold, the combination of elevated yields, persistent geopolitical uncertainty and shifting Fed expectations creates a mixed backdrop. While renewed USD selling offers some support, higher borrowing costs and inflation concerns could limit the upside in the non-yielding precious metal.

Oil prices extend their gains for a fourth consecutive session on Wednesday as the ongoing US-Iran standoff over the Strait of Hormuz shows few signs of easing. The uncertainty is fueling concerns over prolonged disruptions to global crude supplies and supporting prices.

US President Donald Trump said on Tuesday that no talks with Iran are currently taking place and that no dialogue is scheduled. While Trump said the Strait of Hormuz remains open, Iran has disputed the claim and maintained that the strategic waterway will remain closed until the US meets conditions agreed under an interim deal reached in June.

Shipping data also showed that commercial traffic through the Strait of Hormuz remains well below pre-conflict levels, pointing to ongoing disruptions to global oil flows. Around one-fifth of global oil consumption passed through the strategic waterway before the conflict.

Oil prices are also finding support from signs of tighter US crude supplies. Data from the American Petroleum Institute showed a modest decline in US inventories last week, ahead of the Energy Information Administration’s official inventory report due later on Wednesday.

Wall Street closed lower on Tuesday, with technology stocks leading the decline as a sharp selloff in US Treasury bonds pushed the 30-year yield to its highest level since June 2007.

The US 30-year Treasury yield briefly climbed to 5.335%, its highest level since June 2007, before easing to around 5.29%. The rise in long-term yields reflects renewed concerns over inflation, partly driven by higher oil prices, as well as growing scrutiny of the heavy debt issuance by major technology companies to finance artificial intelligence infrastructure.

Markets now turn their attention to the Federal Reserve’s July Meeting Minutes, due on Wednesday, for further clues on the central bank’s policy outlook.

On the earnings front, Home Depot reported better-than-expected quarterly results, supported by stronger demand for smaller home improvement projects. The company reported comparable sales growth of 1.7%, its strongest performance since the third quarter of 2022, and reaffirmed its full-year 2026 guidance.

Markets will also monitor upcoming results from major retailers including Walmart and Target, while Nvidia and Broadcom earnings later this month and in September could provide further direction for the AI-driven rally.