Forex week in review 30/2026: the yen hits a 40-year low as oil spikes on Iran escalation

This was a week where the oil market and the bond market did most of the talking, and currencies followed. The dollar firmed against most majors, the yen fell to its weakest level against the dollar in four decades, and Brent crude briefly settled above $100 a barrel as the conflict between the US and Iran escalated again. The ECB held rates, UK inflation came in softer than forecast, and by Friday afternoon EUR/USD was sitting near the bottom of one of the narrowest monthly ranges the pair has seen in decades.

If you are new to reading markets, this week is a useful case study in how one shock (oil) reaches currencies through several different channels at once: inflation expectations, bond yields, risk appetite and, for some countries, the trade balance.

The week at a glance

• USD/JPY rose 0.79% to 163.79 and set a fresh 40-year high just under 164.00 on Thursday.
• GBP/USD fell 0.93% to 1.3319, the worst performer among the European majors.
• EUR/USD lost 0.48% to 1.1375 after testing support near 1.1362.
• USD/CHF gained 1.13% to 0.8177 as the franc lagged.
• Brent crude futures closed above $100 on Thursday before easing to about $96.78 on Friday, according to Yahoo Finance data.
• US 10-year Treasury yield finished the week around 4.68%, up 12.2 basis points on the week according to investingLive.
• US stocks fell: the S&P 500 lost 0.61% and the Nasdaq 2.13% on the week.

Weekly open and close levels in this recap are taken from Yahoo Finance hourly data (first quote of the week to the last quote on Friday). Your broker’s feed will differ by a few pips because every liquidity provider quotes slightly differently; our guide to reading a forex quote explains why.

Day by day

Monday 20 July: softer Canadian inflation, Japan on holiday

Tokyo was closed for Marine Day, which thinned Asian liquidity at the start of the week. The main scheduled release was Canadian CPI for June. Headline inflation fell to 2.8% year on year against a 2.9% estimate, down from 3.2% in May, and prices fell 0.4% on the month. Gasoline prices dropped 10.2% month on month, and the Bank of Canada’s preferred core measures eased (CPI-trim to 1.8%, CPI-median to 1.9%, both below forecast). Softer inflation reduces pressure on a central bank to tighten, and USD/CAD moved higher after the release.

Tuesday 21 July: USD/JPY breaks to a 40-year high, tariffs on Canada

The yen was the weakest major on Tuesday, down 0.42% against the dollar, as USD/JPY traded to a new 40-year high. Treasury yields rose across the curve, with the 2-year up almost 5 basis points to about 4.26%. investingLive attributed the move to “higher-for-longer” rate expectations and higher oil.

The other headline of the day was trade. The US announced a 50% tariff on a broad range of Canadian imports under Section 338 of the Tariff Act of 1930, the first use of that provision, effective 19 August. Prime Minister Mark Carney said the tariffs violated the spirit of the USMCA, and both sides said talks would intensify. The Canadian dollar lost 0.26% on the day. US stocks, oddly, rallied: the S&P 500 rose 0.89%, led by chipmakers.

Wednesday 22 July: UK CPI misses, oil keeps climbing

UK CPI for June came in at 2.6% year on year, below the 2.7% consensus and down from 2.8% in May. Core CPI held at 2.6%, a touch above the 2.5% expected. The ONS pointed to falling motor fuel prices, particularly diesel. A softer headline print makes a Bank of England hike less urgent, and sterling ended the week as the weakest of the European majors.

Across the Atlantic there was no major US data and the Fed was in its pre-meeting blackout period, so attention stayed on the Middle East. Headlines about threats to shipping in the Strait of Hormuz and Red Sea pushed WTI crude up 2.5% to about $86.36. A 20-year Treasury auction met what investingLive called “sluggish” demand at 5.163%, and yields rose again, led by the front end. USD/CHF jumped 0.86% to around 0.8148, close to its July high.

investingLive also noted that EUR/USD had traded in roughly a 120-pip range over the previous month, among the narrowest monthly ranges since the 1980s. Ranges that tight usually say more about a market waiting for a catalyst than about calm fundamentals.

Thursday 23 July: ECB holds, oil spikes, risk-off

Thursday was the busiest day of the week.

The ECB kept its three key rates unchanged, leaving the deposit facility at 2.25%, the main refinancing rate at 2.40% and the marginal lending rate at 2.65%. The decision was unanimous according to investingLive. The ECB’s statement said the energy price outlook was “highly volatile” and “well above the levels recorded prior to the conflict in the Middle East”, and that the full inflationary energy shock had “yet to play out”. In the press conference Lagarde said the bank was not seeing second-round effects yet and was “not pre-committing to a particular rate path”. Euro-area headline inflation was 2.8% in June, with energy inflation at 8.5%.

Then oil moved. President Trump said he was “close to making a decision” on a military strike against Iran larger than any previous operation, and the US Senate blocked a resolution to curb his war powers. Brent crude was quoted at $100.51 late in the session, up 6.85%, and WTI rose more than 6% to around $92. US stocks fell sharply: the S&P 500 lost 1.21% and the Nasdaq 2.15%.

US initial jobless claims came in at 187,000 against 212,000 expected, a strong labour reading that added to the case for a hawkish Fed. Two-year yields rose to about 4.35%. USD/JPY traded within two pips of 164.00, EUR/USD nearly broke month-long support at 1.1362, and gold dropped about $80 (1.9%) as higher yields made non-yielding metal less attractive on the day.

Friday 24 July: PMIs, Japanese CPI, and a stalemate on Iran

Japan’s June CPI rose to 1.7% year on year from 1.5%, with core inflation at 1.6%, in line with forecast. Japan’s finance minister Katayama said Tokyo and Washington were in close contact and that Japan stood ready to act decisively on the currency. investingLive also reported that a US Treasury report had pressed the Bank of Japan to keep raising rates and warned that “excessive currency volatility is undesirable”.

In the US, the S&P Global flash composite PMI rose to 53.6, the highest since November, with services at 53.6 against 51.5 expected and manufacturing slightly softer at 53.8. New home sales came in at 628,000 against 610,000 expected. In Canada, June producer prices fell 1.4% against a 0.4% expected decline.

Geopolitics stayed in control. Trump said Iran was “not ready to make a deal”, while reports that Pakistan was trying to restart US–Iran talks pulled oil lower. USD/JPY finished the day unchanged, close to its highs, and the dollar was mixed into the weekend.

Pair by pair

USD/JPY: the rate gap wins again

USD/JPY rose from about 162.50 to 163.79 on the week, with a high near 163.99. The driver is easy to state and worth understanding properly: the gap between US and Japanese interest rates. The Fed’s target range stood at 3.50–3.75% and markets were pricing a meaningful chance of a hike, while the Bank of Japan’s policy rate was 1.00%. When US yields rise and Japanese yields do not keep pace, holding dollars pays more than holding yen, and the yen weakens.

The complication for traders is official intervention risk. Japan’s finance ministry has a long record of stepping into the market when it judges yen weakness to be excessive, and this week’s comments from Katayama were a clear warning. Our guide to central banks and interest rates covers how rate differentials and official rhetoric interact.

EUR/USD: a range under pressure

EUR/USD lost 0.48% to 1.1375. The ECB’s hold was fully expected, so the pair took its cue from US yields and oil. Higher oil hurts the euro area as a large energy importer, and higher US yields make the dollar more attractive to hold. The weekly low of 1.1368 sat just above the month-long support level near 1.1362 that technicians were watching. Our explainer on support and resistance explains why traders cluster around levels like that, and why breaks of narrow ranges can be sharp.

GBP/USD: soft CPI, softer pound

Cable fell 0.93% to 1.3319, testing a Fibonacci retracement level near 1.3299 that investingLive highlighted. The trigger was the downside surprise in UK CPI, which reduced the odds of an early Bank of England hike at a time when other central banks were openly discussing tightening. Lower relative rate expectations usually mean a weaker currency.

USD/CHF: the franc as a funding currency

USD/CHF rose 1.13% to 0.8177. That may look odd in a risk-off week, since the franc is often seen as a safe haven. But Swiss rates were at zero, and when global yields rise, low-yielding currencies such as the franc and yen tend to underperform. Safe-haven behaviour is not automatic; it depends on what is driving the market.

USD/CAD: oil up, loonie down

Normally higher oil prices support the Canadian dollar because Canada is a large oil exporter. This week USD/CAD still rose 0.52% to 1.4092, because the tariff threat and softer domestic inflation outweighed the oil effect. It is a reminder that one textbook correlation can be swamped by a stronger country-specific story.

Gold: up on the week despite Thursday’s drop

COMEX gold futures rose 1.74% to $4,070.80. They reached $4,171 on Wednesday before dropping on Thursday as yields jumped. Gold has two competing forces in a week like this: geopolitical demand pushes it up, while higher real yields pull it down.

Oil, inflation and the central bank dilemma

The biggest lesson of the week is how an energy shock puts central banks in an awkward spot. Higher oil prices lift headline inflation directly through fuel and heating costs. If businesses and workers then build those higher prices into wages and other prices, the problem spreads. Central bankers call that “second-round effects”, and both the ECB and the Bank of England have made clear that this is what they are watching.

At the same time, higher energy costs act like a tax on consumers and companies in energy-importing economies, which weakens growth. Raising rates into a supply shock can deepen a slowdown; holding rates risks inflation becoming entrenched. That is why market pricing swung so much this week. investingLive put the odds of a 25 basis point Fed hike at the following week’s meeting at around 38% by Friday.

For currency traders, the practical point is that you need to know which way each central bank is leaning, and how much is already priced in. Our guide on how economic data moves forex explains why the surprise versus consensus matters more than the number itself. UK CPI at 2.6% is not low in absolute terms, but it was 0.1 percentage point below consensus, and that was enough to weigh on sterling.

Why a 40-year high matters, and what it does not tell you

Headlines about “40-year highs” attract attention, but they say nothing about what comes next. Price levels have no memory. What matters is the set of forces acting on the pair: the interest rate gap, energy import costs (Japan imports most of its energy, so higher oil worsens its trade balance), and the risk of official action.

Intervention risk changes the shape of risk, not only its direction. If a finance ministry sells dollars for yen, USD/JPY can drop several big figures in minutes. A trader long USD/JPY with high leverage and a distant stop could lose far more than planned. Under ESMA rules, retail clients in the EU are limited to 30:1 leverage on major pairs and benefit from a 50% margin close-out rule and negative balance protection, but those protections do not prevent large losses. Our guides on leverage and margin and margin calls and stop-outs walk through the arithmetic.

Here is an illustrative example. Suppose a trader holds 1 standard lot of USD/JPY (100,000 dollars). One pip on USD/JPY is 0.01 yen, so a one-pip move is worth 1,000 yen per standard lot, roughly $6.10 at a rate of 164. A sudden 300-pip drop, which is well within the range of past intervention days, would cost about 300,000 yen, or roughly $1,830 at that rate, before any slippage. If the stop sits in the path of a fast move, it may fill well below its level. Our slippage guide explains why.

The yen carry trade in plain terms

A large part of the yen’s weakness comes from what traders call the carry trade: borrowing in a low-yielding currency such as the yen and holding a higher-yielding one such as the dollar. The holder earns the interest rate difference each day. For retail CFD traders, that difference shows up as the overnight swap. A long USD/JPY position typically receives a positive swap when the dollar rate is well above the yen rate, while a short position pays it, after the broker’s markup. Our guide to swaps and overnight financing covers how this is calculated and why it is charged three times on Wednesdays.

Carry can look attractive in a calm market, but the trade has a well-known weakness: when it unwinds, it tends to unwind fast, because many holders head for the exit at once.

What this week teaches

• Commodities move currencies through several channels. Oil hit the euro and yen through import costs, lifted yields through inflation expectations, and hurt risk appetite. One headline, several transmission routes.
• Surprise beats level. UK CPI was still well above target, but because it came in below consensus, sterling fell. Always compare the release with expectations, using an economic calendar.
• Safe havens are conditional. The franc and yen both fell in a risk-off week because rising global yields mattered more than fear.
• Official warnings are a risk factor, not a signal. Japan’s finance ministry made it clear it was watching. That raises the chance of sudden, large moves in either direction.
• Narrow ranges do not last forever. EUR/USD’s unusually tight one-month range was flagged by several analysts, and tight ranges often end with a sharp move. Position size should reflect that; see our guide to position sizing.

Scheduled next week (27–31 July)

These are the events on the calendar. We list them for planning only; nothing here is a view on how markets will react.

• Monday 27 July: US durable goods orders (June).
• Monday 27 and Tuesday 28 July: US Treasury 2-year and 5-year note auctions.
• Wednesday 29 July: Federal Reserve policy decision and press conference with Chair Kevin Warsh.
• Thursday 30 July: Bank of England policy decision; euro-area preliminary Q2 GDP; US advance Q2 GDP and June PCE inflation; US weekly jobless claims.
• Friday 31 July: Bank of Japan policy decision; US Q2 employment cost index; final University of Michigan sentiment (July); Canadian GDP (May); month-end flows.

Expect wider spreads around central bank announcements and month-end fixings. Our guide to spreads and commissions explains why.

Sources

• investingLive Americas FX news wrap, 21 July 2026
• investingLive Americas FX news wrap, 22 July 2026
• investingLive Americas FX news wrap, 23 July 2026
• investingLive Americas FX news wrap, 24 July 2026
• investingLive Asia-Pacific market-moving news, 24 July 2026
• investingLive: Canada June CPI 2.8% vs 2.9% estimate
• investingLive: market outlook for the week of 20–24 July
• ECB monetary policy statement, 23 July 2026
• Banco de España: ECB keeps interest rates unchanged in July
• CIPP: UK CPI inflation falls to 2.6% in June 2026
• Newsquawk weekly economic calendar, 20–24 July 2026
• Yahoo Finance EUR/USD historical data