# The Inflation Test Came Back Soft and September's Hike Odds Fade - The Dollar Brief - Week of August 13, 2026

> The Dollar Brief for August 13, 2026. A soft July CPI print eased the case for a September Fed rate hike, taking pressure off the front end and leaving the dollar's near-term direction hostage to the data as traders reweighed the Warsh Fed's next move.

## The Dollar Brief

### Week of August 13, 2026: The Inflation Test Came Back Soft and September's Hike Odds Fade

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For two weeks the whole dollar story hung on one number: would July's inflation report come in hot enough to force the new Fed chair, Kevin Warsh, to actually raise interest rates in September, or soft enough to let him keep sitting on his hands? Yesterday morning the number landed. It was soft. And with it, the market quietly closed the book on the "he's secretly about to hike" story, at least for now.

That is the thread running through everything this week. A weak jobs report last Friday and a tame inflation report on Wednesday knocked the odds of a September rate hike from a near-coin-flip down below even money, which points the dollar gently lower rather than higher. Underneath that, the professional currency desks finally put hard numbers on the US-Japan yen rescue (Goldman Sachs estimates it was an $85 billion operation, one of the biggest on record) and, tellingly, argued it says almost nothing bad about the dollar's throne. Meanwhile the slower-burning stories kept building: a fresh legal fight over whether the President can fire a sitting Fed governor, the first serious look at what stablecoins actually do to demand for US government debt, and a sober take on what the November elections mean for America's deficits.

Here's the week, in plain English.

## TL;DR

- **The July inflation report came in soft, and the market's bet on a September rate hike fell below 50%.** Core inflation (the version that strips out volatile food and energy) ran at 2.5% over the past year, "the lowest level since February" and a return to pre-war levels, while the headline rose just 0.1% on the month ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhxLRcEld6q-2FPa3-2F-2BPWepgK80v4tdHuXNxideb57VOO7PDe9Eiao00mHyKMuBtxPGmy2JmbOlq1P-2FShPpl83f-2BrBOUU5OYx1FsAF-2BFYGaU5wA-3D-3D1N95_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR-2Bb9EUn1F-2FsVbWFoIWA3ERDSy7WPAdBnX0Nd-2BnAnyk7iE-2BlWsPoII90dNZ5a0q7hMJy8EYo8QZRDW79SSougsQXDaqWXsKDGsRlDqWjLLlhcQv8A2hUmhVJYdGTOp44tlw-3D-3D), Aug 12). Goldman Sachs's first reaction: it "supports a Fed hold in September."
- **The three-month trend is even calmer than the headline.** Over the last three months, consumer prices are up just 0.5% at an annual rate, and only 1.6% excluding food and energy, both below the Fed's 2% goal ([Kudlow](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgRfxMFXiox1IuYkfI3e3p8RCMUk8tBPi2-2FkgllA8ZOGWa8A4hVggM6x1fEX60srsQ9HQv-2BxHbNeUpwvzVUyyKbKsBftMJIRzFmYAE9dGitsw-3D-3DEx_Z_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR-2BEeqWPOSvy91Rt0NzM79UOV9jI0dFUSMHt0TlaXLiWgMdDeRozI1AXrIwAoS42OFnvQ27fP8UnU2ap54tf3645VSWlgwG1AEGsxnB0xGgXf6nbWToWKhNd9BES9om6Zww-3D-3D), Aug 12).
- **Last Friday's jobs report did the heavy lifting.** The economy *lost* 23,000 jobs in July, the first decline since February, with the weakest annual wage growth in years ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3D_VSS_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRwghAjp8zBr3-2BR8KzHdG2VlM4X-2BZykWPgRvo-2FCE4s1tMb8dtOXkPUQsMs-2F1l3YYtgka-2BZ1QhlNcNlldv-2B2B5KEVQjAzF-2Bx4aYoa7DqpWHxoDSyruPJlnz7g7BKc-2F3WsAzw-3D-3D), Aug 7). JPMorgan's David Kelly said the Fed is "absolutely right not to raise rates right now." That's because you can't get a wage-price spiral when workers aren't getting raises.
- **Goldman's FX desk put the yen rescue at up to $85 billion, and said it's a signal, not a fix.** On [Goldman Sachs Exchanges](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgapV95hgK7XNf4oR6ehwcwZkCN-2F23W-2FclHmTuzprxqougkZHYRv9fPV4HD2ZF4yrJ5t74YXvG9ArvRtdkocFPuXcclUBx9wRcKh18Olx-2F29g-3D-3DVM5I_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR2XW-2BI3I-2BlXUXNUMQ-2FOq4DVFn-2FnkTkXk6QdOa9-2FkuTQ-2B6KaUpHvva9I2S-2BIls7IxoIctl4FgIwmPn5zkPB3mOU7vbAdjlwAmndhOxx5qClecbU2eBampjbCt2kL-2BtJYdNA-3D-3D) (Aug 13), strategist Karen Fishman estimated Japan spent up to $85 billion over two days, its biggest intervention outside the 2011 Fukushima aftermath, while the US contribution was tiny and "more about the signal."
- **A rare data point on how violently traders unwound.** Goldman's options head Praneet Shah noted fresh figures showing "the fourth largest absolute reduction in the [yen] positioning in the 20-year history" (a near-record scramble to close out bets against the yen) ([Goldman Sachs Exchanges](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgapV95hgK7XNf4oR6ehwcwZkCN-2F23W-2FclHmTuzprxqougkZHYRv9fPV4HD2ZF4yrJ5t74YXvG9ArvRtdkocFPuXcclUBx9wRcKh18Olx-2F29g-3D-3Dp_s7_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRz-2BgGG26lYiETl9zZgjeNnOHGXWwBIDwDyJtzv3Oo8kEdPKKSt3UVFRk0-2BEC4eNrKFbI-2BWEHfLdQEqMQLYkeqYgZ562wV6l3pHCIRlXbMEwj66C0WYCab3dQo42S4TMg7A-3D-3D), Aug 13).
- **The most authoritative outside voice says the rescue works only if Japan raises rates.** On [Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3DdXXF_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR2kuuvbxdNePL5oRa-2BUUtd8t7t6ADHL-2BtHeHmHUmgyvPu7UQN6hgEi-2BhTvF7whlCDYm4wmor4H7R8yFC6xtsFQEqn3ErwsgjTNhPFz99nnlap7uEs45NamJN3aUTnsW-2FGA-3D-3D) (Aug 6), the Council on Foreign Relations' Brad Setser called the yen "insanely weak" (cheaper, adjusted for inflation, than in the 1970s) and said the intervention "will be enough if the Bank of Japan is going to raise rates," and tested if it doesn't.
- **Fed independence got a courtroom.** On [Bloomberg Law](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjFZZihVqwbWL4-2FaSV00dn0oTeXBjo-2B7xJWEFXpK-2BW6X0xRY9uK1AFrLR65YzkIBUenwXucK2YLaDyVkq1n9GtW39MnsDrnQV0n1QF-2FEbX9LQ-3D-3D-Un__7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRy9ZlSSH43shBGjw-2BltlZ3VGSWKvUFpHqr-2Bog0YUhHlfRp7-2B-2BPZXsZOAkdKdZ-2FYzo8MalerHVgNM7mTWYBHwwHWukltKfW125qGoNcZ5lBZsb5PkhcfoGDv1f10Xcsd7DQ-3D-3D) (Aug 10), constitutional-law professor Harold Krent walked through Trump's second attempt to fire Fed Governor Lisa Cook, calling the fight over whether it sticks "uncharted waters."
- **And it got phone records.** [Bloomberg Businessweek](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj0yfvcKcgu45zTXmjjiMO7W1Yw-2BEcNARHajPj4PDd1u1gE2CJsZ5U-2F3Vqqe9BGoQ0Vr6gY-2FohZzbhMRJ1XOArOj2akr9aKtSiPtkrsQmep0A-3D-3DZ0uS_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR4-2F5dJ-2BfASyvQjgALybruTmjirteRdL4FEJB2Ol4xGzHL9D43dRRSDsXzsiaEtlMG9vz8UjdBWJEYMbuwEaQOwel4XIoAX28qmJN-2B2TFgI-2FfkPF1iZMBt1sdZzahhItv6A-3D-3D) (Aug 6) reported Trump has called Warsh on an "irregular" basis since May, the worry being less the calls than the lack of disclosure.
- **A genuinely new dollar-demand story: stablecoins.** On [Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3DaMCg_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR5oR-2F6aXiBXltl1aUbgda0BGH4PLoUxOvIwesbXa2Stqm8eu9t-2FFNrWk4DML25EDVNNhDQz9R9sHHcQ37Wqv12iUKj0PXKaxRINbiaoolnv9zJ1Sm1CV3dEd7CK-2FqrUBRA-3D-3D) (Aug 10), economist Gianluca Benigno laid out how stablecoins growing from $300 billion today to a projected $3–4 trillion would create up to $4 trillion of new demand for short-term US government IOUs.
- **The midterms enter the picture as a slow fiscal risk.** On [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjWKdoXSpec1aSzTxNvGcyRExHFHQ-2Bl60QvUoXOvlwmEZ8Ni72XPrGRkIRyAFafytFuivV-2F06yjc6vxh8X3Enc8HSak68h6-2FIPrlGbw072GXA-3D-3DGc4S_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR53lAPkSAK7XR3tyNIiQWdVPtGMqDfJI639ILBspiOAszXIl-2FNaAZA1DB8sesIUPevjaLXIEX5r-2F2FtR5oOe2oJwcRqJQMu4l95LM4vNGRKdl2i8oLLtHSsd8YjsHY1xPQ-3D-3D) (Aug 11), PIMCO's Libby Cantrell said her base case is a split Congress and gridlock, which markets like, but which means nobody fixes the deficit before a looming 2031 crunch.

## What's New

### The Inflation Scare Fizzled, and With It, the September-Hike Bet

Rewind to last week: the entire debate was whether Warsh had misjudged the economy by not raising rates in July, and whether July's inflation report would expose him. Two reports later, that argument has mostly deflated.

Start with the jobs number, because it came first and it hit hardest. On Friday, August 8, the July employment report showed the economy *lost* 23,000 jobs, the first outright decline since February, with, in the words of [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3D-zrN_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRzBvMXR8gSAUrnqNdCEj14xi-2FWzm-2FlXDk-2FOBoHSVtacPWcldC7y1doZRgmQaZ6hlriAnQbi-2Bm31HvIJOh-2BmeH84pWzsibRCxj8CvmYMcTDsinYqr7Tmh0GqFLYEVvjMLOg-3D-3D) (Aug 7), "the weakest annual wage growth in years." That immediately, as the hosts put it, "prompts a rethink of any potential rate hike in September." Bond yields fell and tech stocks jumped, the market's way of saying it liked the idea that the Fed is now more likely to cut than to hike.

The clearest explanation of *why* soft wages matter came from JPMorgan Asset Management's chief global strategist David Kelly, in studio on the same show. His line, call it the dove's whole case in one breath: "That is why the Fed is absolutely right not to raise rates right now." His reasoning is worth spelling out, because it's the crux of the argument. To get a 1970s-style inflation spiral, he said, "you've got to get the wages to go up. And that's not happening." Why not? "I think workers are just so dispirited… less than 6 percent of the private sector is in the union. Everybody else is fighting for themselves. And it's pretty hard to… bash in the boss's door and say, give me a raise or I quit." He called the result "Teflon inflation": nothing sticks, because pay isn't chasing prices. (Kelly runs money at one of the largest asset managers in the world; weigh this as a buy-side operator's read, not a pundit's.)

Then came the inflation report itself on Wednesday, August 12, and it did nothing to scare anyone. Core inflation, the measure that strips out jumpy food and energy prices, rose just 0.2% on the month and 2.5% over the past year, "the lowest level since February" and, as [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhxLRcEld6q-2FPa3-2F-2BPWepgK80v4tdHuXNxideb57VOO7PDe9Eiao00mHyKMuBtxPGmy2JmbOlq1P-2FShPpl83f-2BrBOUU5OYx1FsAF-2BFYGaU5wA-3D-3DMVH2_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR4A-2F409Ri1XYv09-2BJFHbZmSgi8-2FXwMM4VLX1OJSgXksPdMy3p-2FoLbxJRjOl1HhnZeHBY2apCR18UH82WjOhyNtE0L-2F5kEMlVbu8BhMKbqhnCVQh3Non-2BQsEMk97LOhAIxw-3D-3D) (Aug 12) noted, "a return to pre-war levels." The headline number rose a mere 0.1%. Goldman Sachs's read was blunt and quick: it "supports a Fed hold in September." Asked about the odds of a hike, the hosts pegged September at "under 50 percent" and year-end at "about 55."

The details tell you where inflation is and isn't. Falling: hotel prices (down 3.3%, which dragged the whole shelter number lower), gasoline, fresh vegetables, and, thanks to specific policy pushes the White House was quick to claim, beef, auto insurance, and prescription drugs. Rising: computers and memory chips (up around 3.5%, a direct result of the AI data-center building boom), airline fares, and software, up "about 21% from a year ago." That last cluster is the awkward twist of this cycle: the AI spending spree is itself a small source of inflation right now, even as Silicon Valley promises it will eventually make everything cheaper.

The administration, unsurprisingly, took a victory lap. On his show, Larry Kudlow said the report "takes the Kevin Warsh Fed off the hook. There'll be no interest rate tightening" ([Kudlow](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgRfxMFXiox1IuYkfI3e3p8RCMUk8tBPi2-2FkgllA8ZOGWa8A4hVggM6x1fEX60srsQ9HQv-2BxHbNeUpwvzVUyyKbKsBftMJIRzFmYAE9dGitsw-3D-3DAHzP_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR0Bth3YJ9nUwKBLq2KPjKeXJpF7j-2Fv3LMIVb7iQLPBwlq3vKMi6ghthEBiJWa2ABX9G82ebkrm7IuDmkGeNgIxQFg3SzOwgX4qpBu7yFQeYNEyCrS8L69QlJ9YDEWIpTMw-3D-3D), Aug 12). His guest, new White House Council of Economic Advisers chair Chris Phelan, leaned on the calmer three-month trend: annualized, headline inflation is running at "half a percent" and core at "1.6%," both "well under what the Fed targets." Useful numbers, but remember these are the government's own scorekeepers cheering the government's own data, so treat the framing as advocacy, not analysis.

Not everyone bought the all-clear. The hawkish minority still exists: on [Wealthion](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhIX9CN2e-2BztKNv3QCOTcob4HJrbjz4IhAkmZISqMpeOemaEY-2Bg9ESvaHlEKopAa8W8V8fzwJ8gMEwkFEbsP0BXQj8zDErfplpo-2Bl58GZaYBQ-3D-3DxF34_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR-2F1VkiRb1vm-2F-2BHOqSZUOy1RqwtoruPCRXmT-2B3hrcE9BcN4UQkNP1-2BDh5DD8TIWtDcvXUAaL-2FpX43Yry2l0BmBSHAfdqEv8ArEBnHb5QtUCQzgAjtUSwnwQoIxgA8CquwZA-3D-3D) (Aug 11), veteran strategist Ed Yardeni repeated that a quarter-point hike is cheap insurance for the Fed's credibility. And on [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3DUVd9_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR8BsUuy-2B4trjn3d9YK33aYPvDujexvTSDfNdCT4SB6jXNy8d9WVegiJsCt3c9Gs6slgHKwKPu1ecshdL9HuNLzoneBma8akYpT-2BwUIeO7BKCp-2BKCQJnWtxYql7oQCX40mg-3D-3D) (Aug 7), the hosts flagged a Mohamed El-Erian op-ed arguing Warsh is being "misread." But the price action went the other way. As financial adviser David Bahnsen laid out on [The Dividend Cafe](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiS1sLwoDG73ar5cCuecT5WNv0dLGGczyqXiFmhuZhPJEsGrT0mf9bIMVTMy4HWgfT63k5RdFn4B5A1gJLDXtSW-2BdmHD-2FuUiecNrLKU20KNjg-3D-3D_uZC_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRzi5WVVFP3V7hEeTYV9Q8GCsVvEUmRra7GSFdlzE7ScoikmGzdXWXvfyFsiwq7bSvE5nQ6PEUMJQJs7YEHOePqEidnZXo-2B2s4XFKnZWIebjfHdJ60fwGj5QLObjuBwj1dQ-3D-3D) (Aug 10), hike odds had already slid "from approximately 80% to 50-50" after the weak jobs data, and history is not on the hawks' side: only "9% of past Fed rate hikes occurred when three-month average job creation was at current levels."

**Where this leaves the dollar:** softer. Lower expected short-term interest rates make dollars less rewarding to hold, so the currency drifted down across the board after the jobs report. The near-term driver here isn't some grand de-dollarization story, it's the plain arithmetic of the Fed's next move.

One more piece of color that will matter for the dollar's medium-term path. Trump himself, asked point-blank whether Warsh should avoid a hike before the election, was oddly restrained ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3Dygxf_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR4LWtSbmVdQija8IS-2BR0p93mk-2BIRoxC2h3QQpuwaHHGU1MkBUPXTOtrw98dx8uzDWmdbDJk98PgxPfqyA6U20axnKqe4DwLsi8i0Atq7yg7X6XBYrTdSOPx1wgYQHihCEA-3D-3D), Aug 7): "Well, it's up to him a little bit, but not completely. He's got a board that's very political… The United States should pay the lowest interest rate in the entire world… I think he's great. I won't be criticizing him." For a President who spent years publicly hammering the previous chair, that counts as gentle.

### Goldman's Own Desk Broke Down the Yen Rescue, and Put a Price on It

Last week the yen commentary came from the sell-side desks in broad strokes. This week Goldman Sachs devoted a whole episode to it, and the numbers are worth having.

On [Goldman Sachs Exchanges](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgapV95hgK7XNf4oR6ehwcwZkCN-2F23W-2FclHmTuzprxqougkZHYRv9fPV4HD2ZF4yrJ5t74YXvG9ArvRtdkocFPuXcclUBx9wRcKh18Olx-2F29g-3D-3DFiu4_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR7yXVbNpGVCo-2Fn5G3fS3M7iA1FczEmsIb1KVh4aH8IH21ANgwL-2BfMaGoh9BvOQW58vWoeJtPpP6H4jt59XRh0T2PhbeydnaSui-2FAsdE4qNxXn4bs4UwYf0fZi93UrR5-2BDg-3D-3D) (Aug 13, recorded Aug 10), Goldman Research strategist Karen Fishman estimated the operation's size using indirect data, dealer volumes and central-bank figures, because official numbers won't come out for a month. Her estimate: over July 30–31, Japan "probably amounted to up to $85 billion," possibly more on August 3. To put that in perspective, that would be "Japan's biggest two-day intervention in the FX market on record outside of October 2011," right after the Fukushima disaster, the last time the US and Japan also acted together.

The most useful thing Fishman did was explain why the *US* joined, and her answer reframes the whole event. It was not, she argued, really about the yen. It was about protecting the US government-bond market. She gave three reasons. First, the US has been "encouraging the expansion and use of the Fed's facility that allows central banks to raise dollar cash by selling their US treasuries to the Fed and then agreeing to buy them back later" (a plumbing tool that lets Japan get dollars *without* dumping Treasuries on the open market and spiking US interest rates). Second, the timing: the US joined Japan's efforts in January and July, both moments "when there has also been upward pressure or some volatility in US interest rates," but sat out April, when there wasn't. Third, the US leg was tiny, historically "around one to two billion dollars," and wasn't choreographed like past joint actions. Her conclusion: it was "more about the signal of support and ultimately the US's focus on market conditions rather than taking a strong view on where the yen should be."

Goldman's options-trading head, Praneet Shah, was on the desk as it happened and added the human texture. Thursday and Friday were "one of shock and surprise": the Ministry of Finance did about $60 billion Thursday and $25 billion Friday against a market that normally trades around $30 billion a day. The yen jumped 3% Thursday-to-Friday (in line with a normal intervention), then a *further* 2% once traders realized the US was involved, "despite the fact… that the volumes actually weren't that large from the US side." The symbolism did the work. The pair broke below the 158 level, a closely watched line (its 200-day average).

And here's the near-record data point. Shah cited fresh government positioning figures showing "the fourth largest absolute reduction in the [yen] positioning in the 20-year history" (meaning traders who had bet against the yen scrambled to close those bets in one of the biggest such unwinds ever recorded). When a 3% currency move gaps against you, he explained, "that's your entire annualized carry just wiped out in one move," so leveraged funds are forced to bail.

Does it work? Both Goldman voices said the same thing everyone's desk is now saying: it buys time, not a turnaround. "It's not a sustainable fix," Fishman said. "If there's no subsequent policy shift, those existing pressures on the currency tend to reemerge." That's exactly what happened after Japan's solo intervention in April and May, when the yen was back at 40-year lows within months. The swing factor is the Bank of Japan's September meeting, where the market now prices "a 65% chance that they hike 25 basis points." Shah: "That I think they really do need to deliver on."

Two other Goldman nuggets worth filing away. On the "does this hurt the dollar's reserve status?" question, the fear that helping Japan sell Treasuries today means the US might block a reserve manager tomorrow, Fishman called it "a bit of a leap." If anything, she argued, leaning on the Fed's facility "just demonstrates how no other currency currently comes close to the US dollar in terms of its usefulness, network effects, and the supporting infrastructure." Shah agreed the plumbing support "actually supports the dollar's role as a reserve currency." And on the dollar itself, Shah sees "a steady glide weaker in the dollar" into year-end, with gold, the Chinese yuan and the yen all starting to firm against it, but, crucially, "not due to reserve currency considerations and just more to do with the path of inflation and expected Fed reaction function."

### The Best Outside Read on the Yen: Brad Setser

If you want one non-bank voice on the yen, it's Brad Setser of the Council on Foreign Relations, a former Treasury official who is as close to a plumbing expert as exists, on [Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3De2FH_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR7zLOOwmmRYDRRNok09VMkPdsdKGDZtt4zFendRVcFVWRio7UfArkYdFOJBBJHfGasBjIwSlweojIxEn1JUMtI9Cg0-2BXsnjpbD0XdCJM3jJRaeU-2BcHrAkdUuh2iamDamFQ-3D-3D) (Aug 6). (The episode opened with the now-famous photo of Treasury Secretary Scott Bessent's to-do list, which read simply "buy JPY, 5–10 billion.")

Setser's framing is the clearest available. The yen, he said, is "insanely weak… It pushes the yen below in inflation adjusted terms where it was in the 1970s. We're back to the 1960s. These are extreme undervaluations." Why does the US care? The classic reason is trade, "a weak yen is bad for Detroit," but Bessent instead emphasized avoiding "destabilization throughout the Asia currency complex" and, importantly, pressure on the Treasury market. Why sell euros rather than dollars? Because Bessent, a former currency trader, wanted to "be a bit cute" and signal "this isn't… a view about the dollar. We still want a strong dollar. This is just a view about the yen."

His bottom line is a clean conditional: "I think it will be enough if the Bank of Japan is going to raise rates and maybe raise rates several times… if the Bank of Japan doesn't raise rates in September, this will be tested." He's more optimistic than the textbook crowd for a specific reason: the biggest holder of foreign assets isn't hedge funds, it's the Japanese government itself (the finance ministry and the giant public pension fund), which earns "well above a percentage point of GDP" in income abroad that "doesn't hit the FX market" because it never comes home. Get even a little of that repatriated, alongside BOJ rate hikes, and "you change the dynamics."

The desk consensus behind him hasn't changed from last week: JPMorgan still sees a *weaker* yen (164) by year-end on [At Any Rate](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhJHEfbaXYXfJ4u0ZV3My881GHDanVqejXHYafsFeZO1Z5WMFROJIYZtGvUp5NHZzE1uZTDV7Ye-2BjXkJ-2BFm4sTmo4cuwznltsrKWcIeLOYItQ-3D-3Df3hO_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR3LZ76hxwM4f6LJQzPx3mcGA0MiO-2FjiwWNYvz3vhQ3y3MQ2SezwipwxrCp0YnmD8ujW7hVZ8atpiaUmrlVvjOoWBreTjpTP-2FiMYnUBFAWCglVwAaTr-2FHdX-2FfrynoRKdDsQ-3D-3D) (Aug 7), while MUFG needs a September *and* a January BOJ hike to drag dollar-yen toward the high 140s in 2027 ([The MUFG Global Markets Podcast](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj-2B4GTaPi-2FhHt-2BYJPFB-2B8PtsDyaGZ8Fjb8M0F6WzbKSQGeRwf0EDMk5BEJluYESYSfJ9CvajCIjfZbI3E7KdMn2C-2FbsORyr1aOEH8f2fPOHUg-3D-3DZdTr_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRy3Ks4wQfxhZPghfJGb7mK44E-2BxcdV6zkeuMdyp-2BhZ98tcM1C196lGgAwXAl5Ta6T5e2Gx5-2Fm07lY0T42hy-2BHcH7b-2BGcwypG-2BOjNOqWeEmANL3k4GFi2ST6IB3vGHKLGNA-3D-3D), Aug 7). The pundit fringe still warns of a crash: Michael Gayed called it a "Band-Aid on a bleeding patient" on [The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdfkvuroXYlf51Ec-2BvX84LefHl-2BGXjIfkwEVL-2BNTDMB2vgPNVmNqCcCfDoFexdmpyS-2F31LfsiqfNGjk0XoVOLYVPs-2B4AklxUCeng-2ByBA2UVg-3D-3DHB4P_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR6opHOCvEFumE4N9-2Fkm-2B37dC1OcVAUVIT3o3a2fUT3yuINrzFaPyvZk-2F8sNiXdRqihHxaYnwKpIEXa8A8fncYlYbbBdpPLahOSn5eNP-2BI1pYa59pJzHSH9i7pEloSJj-2FAQ-3D-3D) (Aug 10), but no desk this week expects a 2024-style violent unwind.

### The New Structural Story: Stablecoins as a Dollar-Demand Machine

Here's a theme that barely registered a week ago and deserves attention: what digital dollars do to demand for US government debt. On [Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3DCmMH_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR1xiQZChlt2c2iWcm6iN7AJMuD46cCRRrtOVRcbEw7VQbsDEotgdNoW9cbQwdgucNNBCzHjace-2Fm-2FgKZADyKEOMtTAbDoMmtBK8ZsTiov69jgGahY1wias3Fz-2FetYAqqqg-3D-3D) (Aug 10), host David Beckworth walked through it with economist Gianluca Benigno.

The starting point, which trips up a lot of commentary: stablecoins (digital tokens pegged to the dollar) "do not expand money supply." What they change is *who* profits. Under the US GENIUS Act rules, a stablecoin issuer hands you a token that pays no interest, and backs it with Treasury bills that *do* pay interest. That gap is "seigniorage" (the profit from issuing money), and it gets "transferred… from another private agent in the economy, the bank, that had that privilege earlier on." In plain terms: the profit that used to accrue to banks now flows to the stablecoin issuers.

The part that matters for the dollar is the demand for Treasury bills. There are, Benigno noted, "predictions that we can get up to… $3 to $4 trillion in stable coins within a decade. We're about $300 billion now." If most of that is backed by T-bills, "then they need to have as a backing 4 trillion T-bills." That's real, new, price-insensitive demand for short-term US government IOUs, buyers who "just need to have T-bills as backing for regulatory reasons," regardless of the yield. Whether it becomes *net new* borrowing or just reshuffles who owns existing debt "depends on Treasury debt management decisions." If the Treasury doesn't issue more, Benigno expects a "stablecoin compression premium": the wall of forced buying pushing short-term yields down.

Why this belongs in a dollar letter: it is a fresh, structural argument for *built-in* demand for dollars and dollar debt, the quiet counterweight to every "the dollar is dying" headline. (Benigno is an academic economist and former New York Fed researcher; this is analysis, not a market call.)

### Fed Independence Stopped Being a Talking Point and Got a Courtroom

Two concrete developments this week turned the independence worry from mood into mechanics.

First, the phone calls. [Bloomberg Businessweek](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj0yfvcKcgu45zTXmjjiMO7W1Yw-2BEcNARHajPj4PDd1u1gE2CJsZ5U-2F3Vqqe9BGoQ0Vr6gY-2FohZzbhMRJ1XOArOj2akr9aKtSiPtkrsQmep0A-3D-3D9F8z_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRx9wZRNbY-2B-2FXudKRdgaQk60mwi014bzhxNqPDeiKvmTDio0tr7TVzDrzdJHwc16tUDmhPKnrWmbVCIhvRZIyjdzbcBT2Pss-2BzmptbZTq2LREjKznMqE9g3onGmvRYj8tYw-3D-3D) (Aug 6) reported, via Bloomberg's Enda Curran, that Trump "has called Chairman Warsh on an irregular basis" since Warsh took the job in May, "inquiring about forecasts, opinions." The reporters were careful: they don't know monetary policy was discussed, and the real issue is "the lack of disclosure… the backdrop being all of the political pressure on the Fed." Bloomberg's Michael McKee gave the history, this used to be normal (Nixon leaned on Arthur Burns to go easy before the 1972 election; LBJ "used to drag his Fed officials down to the LBJ ranch"), but it "hasn't been the practice of presidents in recent years." He also delivered the week's best deadpan on the balance of power inside the Fed: the running joke is "that Waller's in charge of policy and Warsh is in charge of task forces."

The White House pushed back the next day. On [Bloomberg Talks](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjq-2BFvCsLxDV7gzM3xCe5W3SUmvXJYBLp6NY-2FGuEEXZi0agDm2ZxaP1panVu0wXrlLMP4Uav6i212XIxIKefPtL2q6vzINdxABYmImEoOGxXg-3D-3DsyLG_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR3DAdn0fnXZFg8ayIQLahax-2FIeCO8pXTbq2Xmoe-2BwapVA-2F5yUcxaMmaFrUHkFJTTUHCF1lgwt-2F4h77vzZB-2FGLjfvMZogx2SkAXTCs1e6psplB6t-2BpImp3GD9dANWYKyhDQ-3D-3D) (Aug 7), National Economic Council director Kevin Hassett insisted the President "doesn't say, hey, you got to do this or that to interest rates. He respects the [Fed]," and framed the calls as ordinary economic chatter with "somebody at the Fed now that the president is 100% sure is going to do what's right based on the numbers."

Second, and more consequential, the Lisa Cook fight went legal. On [Bloomberg Law](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjFZZihVqwbWL4-2FaSV00dn0oTeXBjo-2B7xJWEFXpK-2BW6X0xRY9uK1AFrLR65YzkIBUenwXucK2YLaDyVkq1n9GtW39MnsDrnQV0n1QF-2FEbX9LQ-3D-3DvqxW_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR4FQ6hK-2FegnmrnV0r4rT5525sn2jmA9X9ACX5pAATzedCSSNL4Oko6r3R7RMbCMPkmmrUpWedYpadqE9hkDFw6zKHe-2ByhL6Dq-2FHGzNA-2FR45mDIt1m4w1ckWx9RPUMxZHfg-3D-3D) (Aug 10), Chicago-Kent law professor Harold Krent laid out the state of play. In June, the Supreme Court in a 5–4 decision let Cook keep her seat, faulting Trump for not giving her notice and a chance to respond before trying to remove her over mortgage-fraud allegations. Now the administration has sent Cook a letter giving her until August 26 to respond to the same allegations, which Krent reads as Trump "following the marching orders from the court" by providing that informal hearing.

But the real fight, Krent stressed, comes *after*: Trump is "extremely likely to ignore the responses," declare cause, and remove her, at which point "Lisa Cook will go to court" and a judge must decide whether to reinstate her while the case plays out. That's the "uncharted waters." Two hard questions have no clear precedent: whether conduct from "five to 10 years" *before* she joined the Fed can count as "cause" for removal, and whether a court would even order her kept in office pending a hearing, because doing so means "forcing somebody to remain in office that the president doesn't want," a real intrusion on presidential authority. Cook's term runs to 2038, and Krent expects a vindictive-prosecution defense echoing the earlier attempt to subpoena the former chair. For the dollar, this is the slow-burn risk: markets can price a rate decision in seconds, but a live constitutional fight over who controls the Fed is exactly the kind of thing that erodes the "safest asset" premium over time.

### The De-Dollarization Debate, From a Sober Middle

The "is the dollar losing its crown?" argument kept running, and this week it got a level-headed anchor. On [The KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxvJtvCrPVudSlxr-2FtPWq-2B7MqN7aZw3QejN1AanwOf-2BHVu9Oiqr-2FphEHfwbJSlXZ10yC7klViho3QoTicrX1DFpgCaIFlKsRNdvN06WVQ6XQ-3D-3DC3Sc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRztT0Gl72g9B0-2FFq-2B754wrb4WQoirXSusQqB2UFpYGBDgICdlzSNTwPPMT3WfiGzD1-2BYQ4MGOnkFdbprrLnYgOy-2FoVX8BDcMZt6AvmbSncwLpsAV68fA8aF0A3QXS8bXZA-3D-3D) (Aug 8), FX strategist Marc Chandler of Bannockburn put the reserve-share panic in proportion: the dollar still accounts for "a little bit more than 50 percent of the global reserves" even though the US economy is "not even half of the world's economy," and "there's not really much of an alternative." The decline is real but "marginal," he argued, and partly a measurement trick: people pick the late-1990s peak, before European countries folded their Deutsche Mark reserves into the new euro, which mechanically shrank the dollar's share.

Chandler also poured cold water on the idea that Treasury Secretary Bessent had played the yen rescue brilliantly. Selling euros to buy yen "without even notifying the European central bank" was, he said, a diplomatic break and "kind of short-sighted," especially since the euro is "the second most undervalued currency after the Japanese yen" on the OECD's purchasing-power measure. And on the recurring "bond vigilantes are coming" fear, he was calm: with the 10-year Treasury yielding about 4.65%, "if the market, the world, was really concerned about US fiscal policy… I think the yields would be much higher." He sees "not really much of a premium built in… for heightened political risk."

The alarmed end of the spectrum came from Chris Whalen of Whalen Global Advisors on [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxIqYoxUqFdGpaAhVZB5Qo6ogFoAD2qNkzYdLAGatNUo5jT3UOmVNzoKgotfxx5KRAWpJIvPdUlHj2esEkRVQVVRWKSsA34ew-2B6Ej4r5NQcw-3D-3DHk4p_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR6U-2FSEPEfbka6hF6xGLuL0vok-2FiAKJDnYdV5VOVbaejeW8v-2BR7I-2BkrvGUq7rkvnEBZaOmGD3uqjKhxtOIzVaLGh4IRwtq-2F8fBHYTXXHw6HPvm2L2Bjv9Kwhh-2FEZN-2FwMcDQ-3D-3D) (Aug 8), who argued "financial repression" is returning, the Treasury quietly holding down borrowing costs by issuing mostly short-term bills, with the Fed as its junior partner ("the Treasury is the doggy. The Fed is the tail"). His provocative line: "You can't have central bank independence when you have $40 trillion in debt." He also flagged a neat market tell, using euro-denominated insurance against a US default (credit-default swaps) as a way to benchmark gold, since it captures *foreign* investors' worry about US finances. (Whalen is a sharp but bearish commentator; treat the "debt default" talk as a strongly-held view, not a base case.)

## The Debate

**Will Warsh hike in September?** After this week, the answer tilted hard toward "no."

- *The "hold" case (now the market's base case):* the July jobs report showed outright job losses and the softest wage growth in years, and the July inflation report was tame (core back to 2.5%). JPMorgan's David Kelly ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3DPeYB_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR9ncbV4Laq0AKrKX6gWPEBzFl-2BAwtjJZK2o7EKu1ewEH8vgGPlZMaa-2BWbf795pMyNdMLz3-2FEyrQnQWItebNnJeQjK-2BxvNbSLBB67DzvmvNw1-2F1VCEL7HNdvVh7KrYDXy1A-3D-3D), Aug 7) and BlackRock's Rick Rieder ([Bloomberg Talks](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjQuW7bjFpsv57U8ciWmCxgmwwj0uUR-2FGlx7j3qwJaMCWhD7pgXvIIc1sLTLnIitgRVTktdVVlJYjrz-2B-2FpmGt-2FewaL7FMOc0t5VyNn5Z8l1Qg-3D-3Dobuk_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR6QnxfT3bajaF3im8WktRjoPHmBqu3vdQVPDO7SBKUZdWyhNq0ZkevFiuCBJlYLuMbgbxpSssucFp7tvFXlNzOGLI8v38R7Yf0saC0HlJwwWQ3O0mZwAllyiMt-2FM-2BZ-2BIwA-3D-3D), Aug 7) both say a hike doesn't make sense; Goldman reads the CPI as supporting a hold.
- *The "still should" case (now a minority):* Ed Yardeni ([Wealthion](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhIX9CN2e-2BztKNv3QCOTcob4HJrbjz4IhAkmZISqMpeOemaEY-2Bg9ESvaHlEKopAa8W8V8fzwJ8gMEwkFEbsP0BXQj8zDErfplpo-2Bl58GZaYBQ-3D-3DAs90_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR6JPNBe07tIp5zSUmseP95lEyNUN2dEFIq1x0qTizsniGi60IwAUa1duAg0ThoXdguwfmsyQFkAFMbVYuhX1Y2abirsQQySQFXdpm9-2FFxip9y8Vc5AiA4D2qp510zDZqOA-3D-3D), Aug 11) says a quarter-point is cheap credibility insurance.
- *The tell:* futures now put September below a coin flip and year-end near 55% ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhxLRcEld6q-2FPa3-2F-2BPWepgK80v4tdHuXNxideb57VOO7PDe9Eiao00mHyKMuBtxPGmy2JmbOlq1P-2FShPpl83f-2BrBOUU5OYx1FsAF-2BFYGaU5wA-3D-3DvYWZ_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRw21KukSkYwiZ1beaVPR2gASDifcFA3Jrru1qAKBS3V8eCkpk4qX78vLI4QF-2BcliDduB-2FsEAqbv-2FdUzuNffAVIVqL5wwx7-2Fuzz2AJgWUrh-2BGHKrvLNLJsC3SMk153USrLA-3D-3D), Aug 12). The next real signal is Warsh's Jackson Hole appearance later this month, where several voices expect him to finally spell out his thinking.

**Can the yen rescue hold?** A rare full consensus, from banks to independent experts.

- *The measured base case:* Goldman ([Exchanges](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgapV95hgK7XNf4oR6ehwcwZkCN-2F23W-2FclHmTuzprxqougkZHYRv9fPV4HD2ZF4yrJ5t74YXvG9ArvRtdkocFPuXcclUBx9wRcKh18Olx-2F29g-3D-3DQmWE_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR0esCz3VucEHlVTzgoqGVEQHlaMh3wFcgrfHGCwvI6-2FQLL-2F2of8xkN-2FU-2FbEEYXkFfgsM66mGsQAQcNZlPDiEwZAvLsBA-2BOG5xzhpI8E5T7zKLwPsrHIwZD6I8SMzXIBYPg-3D-3D), Aug 13), Brad Setser ([Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3DhI08_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR1G0YNWJ-2FBiKzqrBCzLHFy83TkH7vU16G4Lv3S6ORjzPiNaxsGcwuz-2B4fg27ET3RJXQRtsl3UGtaHF3VZvI-2FpuUSszsdS-2F3PseXXdbi7UYx0LLJMPlhG2BaA1489uWBf0A-3D-3D), Aug 6) and JPMorgan/MUFG all agree: it buys time, not a fix, and holds only if the Bank of Japan actually raises rates.
- *The swing factor:* the Bank of Japan's September meeting; the market prices a 65% chance of a hike, and every desk says Japan "needs to deliver."
- *The dissent:* pundits like Michael Gayed ([The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdfkvuroXYlf51Ec-2BvX84LefHl-2BGXjIfkwEVL-2BNTDMB2vgPNVmNqCcCfDoFexdmpyS-2F31LfsiqfNGjk0XoVOLYVPs-2B4AklxUCeng-2ByBA2UVg-3D-3D_vQL_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR1-2BR-2BJCcpm6S56iqO-2Bl58CvNu2Tx8Hd2VmfdazpxPcuNlAoNJ-2BDZ8X1inDHqJ4kg-2BlwdOECKWpZ8YYYu-2B6rnI9yeH64EjUw9Oha5COMxd-2FSVrvue-2B3dxKKxercmKkGC86Q-3D-3D), Aug 10) expect the yen to sink right back; no professional desk shares the crash call this week.

**Is the dollar's reserve role fading?** The debate continued, but this week the sober middle spoke loudest.

- *Marginal, not collapsing:* Marc Chandler ([The KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxvJtvCrPVudSlxr-2FtPWq-2B7MqN7aZw3QejN1AanwOf-2BHVu9Oiqr-2FphEHfwbJSlXZ10yC7klViho3QoTicrX1DFpgCaIFlKsRNdvN06WVQ6XQ-3D-3D10MY_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR9Goim6azTYYoybUkUuRByOVxbMAgD5J1Y02-2BXEAjvvTYH97AqCkjs5-2FHn-2FRncMptqbivVju2vSqLKqop1bfnVjERXyMv7wXVR8TOyCLt8sGL-2B9QGSI-2By5Djze7F7EM78g-3D-3D), Aug 8), still ~50%+ of reserves, no real alternative, decline partly a measurement artifact. Goldman argues the intervention plumbing, if anything, *reinforces* the dollar's role.
- *Alarmed:* Chris Whalen ([The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxIqYoxUqFdGpaAhVZB5Qo6ogFoAD2qNkzYdLAGatNUo5jT3UOmVNzoKgotfxx5KRAWpJIvPdUlHj2esEkRVQVVRWKSsA34ew-2B6Ej4r5NQcw-3D-3DzLMM_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRydB3bzh4oe6tFlVS3Ep6QHjkd-2BikMjZ7Tqgbj2AKfKC9CFA6rnAm7HsTGjYUHbsTmR86POsDtunuTjWaifvYkJhxf0lbXQMx-2FtA-2BNjYrlKwSofXZ-2B6S3zGnyzWFtfaccA-3D-3D), Aug 8), "financial repression," a $40 trillion debt, and eventual dollar stress.

## The Trades in Play

Only where a podcast named an actual expression:

- **Lean toward a modestly weaker dollar into year-end, for boring reasons.** Goldman's Praneet Shah ([Exchanges](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgapV95hgK7XNf4oR6ehwcwZkCN-2F23W-2FclHmTuzprxqougkZHYRv9fPV4HD2ZF4yrJ5t74YXvG9ArvRtdkocFPuXcclUBx9wRcKh18Olx-2F29g-3D-3DlYgD_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR7-2B4T6m8zAbG22RR4UE50dA3djBrPf1FOGCrUUjlTQyr75GPZtA71KI0jF3duF5rRamP8Rn-2BOabBzGwWU7dtL39GkCUxfoxXdnYzz17C7LvkArxt-2Brz6q6CqDbO5bccFow-3D-3D), Aug 13) expects "a steady glide weaker in the dollar," driven by the Fed's likely path, not by reserve-status fears, with gold, the yuan and the yen all firming against it.
- **Own the yen against the euro, not the dollar.** Shah noted clients this week preferred to bet on yen strength through the euro-yen cross rather than dollar-yen, and that coordinated US-Japan action makes that a "more powerful" trade. Client flow was split roughly half-and-half between "play for continued yen strength" (targeting 150 in dollar-yen) and "buy the dip."
- **The carry trade survived, but with a warning.** JPMorgan stayed constructive on carry (borrowing cheap yen to buy higher-yielding assets) after the intervention ([At Any Rate](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhJHEfbaXYXfJ4u0ZV3My881GHDanVqejXHYafsFeZO1Z5WMFROJIYZtGvUp5NHZzE1uZTDV7Ye-2BjXkJ-2BFm4sTmo4cuwznltsrKWcIeLOYItQ-3D-3DpGTj_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR2csUMtWkNgTIhfKnZ2XVrcQUyKGhC2ULxh7RT34QYT9EmdNp6VGvMvadCjxDJ4fx4zZCjGCizbTOVpJ1trPUSniF6gGGhPxxIn-2BGalc06051e6uCgVdq2FeWQXA5TeNQw-3D-3D), Aug 7), but Goldman flagged that options markets still carry a hefty risk premium for a sudden yen jump, traders are still braced for another gap move.
- **Gold as an inflation-and-anxiety hedge, with eyes open.** Marc Chandler ([The KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxvJtvCrPVudSlxr-2FtPWq-2B7MqN7aZw3QejN1AanwOf-2BHVu9Oiqr-2FphEHfwbJSlXZ10yC7klViho3QoTicrX1DFpgCaIFlKsRNdvN06WVQ6XQ-3D-3Dpd74_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR-2BSZiWce6bsFlPwYr44yQdvjfiWWmx1rYU-2BaRqLzsJ27OP-2BftKnBxq0JnkUXygLojDcv15TIe8npspQ3UTcRrpyPOArqQLMZEtuc1otXvxAj8G4oPlXSRKgMUwlth8m9Wg-3D-3D), Aug 8) is "long gold" as a trade, sees a base building around $4,400–4,500, and notes a new buyer worth knowing about: gold-backed stablecoins (like Tether) that "hold more gold than some central banks."

## Read-Throughs

- **The dollar's near-term direction now runs almost entirely through the Fed's next move, and this week nudged that dovish.** A soft jobs report plus a tame inflation report knocked September-hike odds below even and points the dollar gently lower. Watch Jackson Hole later this month for Warsh's clearest signal yet.
- **Circle the Bank of Japan's September meeting.** Every serious voice (Goldman, Brad Setser, JPMorgan, MUFG) now agrees the yen rescue is only a bridge to an actual rate hike. A 65% chance is priced; a no-hike would reopen the weak-yen story fast.
- **The Lisa Cook case is the independence flashpoint to watch, and it's a slow one.** The tell, per [Bloomberg Law](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjFZZihVqwbWL4-2FaSV00dn0oTeXBjo-2B7xJWEFXpK-2BW6X0xRY9uK1AFrLR65YzkIBUenwXucK2YLaDyVkq1n9GtW39MnsDrnQV0n1QF-2FEbX9LQ-3D-3D-8XD_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR-2BXTUO6yMhrPNEYU4mbrAv22X26eAW5mTZu-2Fk1UaT-2BP-2BgCEsdrGwRHEVPsDuDSgPFlws7euEPm6IrO3DA4uvNCT1Khj2iuG-2BA-2BBCzimwoMnLYxhyJ-2BIb7y3nb9k13jsWug-3D-3D) (Aug 10), is whether a court orders her reinstated after any removal, an unprecedented question that could climb back to the Supreme Court.
- **Keep the stablecoin thread open.** If digital dollars scale as projected, they become a structural, price-insensitive buyer of US debt, a real, if slow, counterweight to the de-dollarization narrative ([Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3Dqlh8_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhRwEwljiLZigzD0o0CALRl-2FBQrcUOfSTQ49TR-2FZ2PoGT3lGYfbRQH0JfyyY5XbYaBYEptMOvDxId9W3Cj2h30aUjiRUuDMHIrVNrSQooY10EboHSrYaJ6x0ZNvjIVJZA6nw-3D-3D), Aug 10).
- **The midterms are a 2027 story, not a 2026 one, but the fiscal clock is real.** PIMCO's Libby Cantrell ([Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjWKdoXSpec1aSzTxNvGcyRExHFHQ-2Bl60QvUoXOvlwmEZ8Ni72XPrGRkIRyAFafytFuivV-2F06yjc6vxh8X3Enc8HSak68h6-2FIPrlGbw072GXA-3D-3DkOgP_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWXOqZqzFgg0TdQI3LWrxf1x969VbU5zU6Fe-2B-2FqxkqhR8tEqBfko0nDo2Z0iTyqjnzxpW63MQFakIDunYf7T6p8AeDUvFFnlxhmMWdLHbDr16hKJo2s89V-2FyUxO3ni6gKmDukwcrO4fhg543qE81s7Kdav97xbVa4YB4Ae0lRqotQ-3D-3D), Aug 11) expects gridlock that markets nominally like, but which leaves the deficit, taxes and Social Security untouched heading into a "2031 trust fund inflection point" she calls a "forcing mechanism." Meanwhile, gas above $4 a gallon is the near-term political pressure point.

## What Changed This Week

- **The inflation scare resolved dovish.** The July jobs report showed outright job losses and soft wages; the July inflation report came in tame (core back to 2.5%, lowest since February). September-hike odds fell from a near-coin-flip to below 50%.
- **The professional desks put hard numbers on the yen rescue.** Goldman estimates up to $85 billion over two days, a near-record unwind of bets against the yen, a tiny US "signal" contribution, and, notably, argued the whole episode *supports* rather than undermines the dollar's reserve role.
- **Fed independence moved from tone to mechanics:** confirmed irregular Trump-Warsh phone calls, a White House defense, and a live legal fight over firing Governor Lisa Cook that both sides expect to reach the courts.
- **Two structural threads entered the conversation:** stablecoins as a potential multi-trillion-dollar new buyer of US debt, and the November midterms as a slow fiscal risk.

*Levels referenced are approximate, from early-to-mid-August US sessions: dollar-yen around 157-158, after a low near 163-164 and a post-rescue bounce that gave back to roughly a 3% net move; the estimated intervention was up to ~$85 billion from Japan over two days plus a small (historically $1-2 billion) US leg done in euros; Bank of Japan policy rate about 1%, Fed policy rate about 3.25-3.5%; the 10-year US Treasury yield around 4.65%, with the 30-year briefly touching ~5.2% intraday; July payrolls -23,000 with average hourly earnings about 3.2% year-over-year; July CPI +0.1% headline / +0.2% core month-over-month, core 2.5% year-over-year, three-month annualized core about 1.6%; September Fed-hike odds below 50% and year-end near 55%; September Bank of Japan hike priced at about 65%; the dollar still a bit above 50% of global FX reserves; stablecoins about $300 billion today with $3-4 trillion projected within a decade.*

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