Overnight, while the US slept

Wall Street's best session in a month: the S&P 500 rose 1.06% to 7,747.71, the Dow added 624.16 points (+1.18%) to 53,686.11 and the Nasdaq Composite gained 1.4% to 26,584.06. It was a rally led by falling bond yields rather than by earnings — Broadcom slid despite beating estimates and Snowflake fell more than 4%.

Rates & DXY: the US 10-year yield fell about 5 basis points to 4.75%, and the 2-year eased 5bp to 4.34%. Note the shape: that is a parallel drop, not a steepening — the gap between the two is still roughly 41bp, unchanged on the day. The whole curve moved down together, which is the signature of the market taking rate-hike risk out of the front end rather than pricing a growth scare. The dollar index (DXY — the greenback measured against a basket of major currencies) is back near 99.6 and soft, with the yen doing most of the damage.

The dominant driver — a rate hike the market no longer quite believes in: since Fed Chair Kevin Warsh's hawkish Jackson Hole keynote, markets have been carrying meaningful odds — around 50/50 by mid-week — on an interest-rate increase at the mid-September meeting. Overnight, Governor Christopher Waller said price pressures were showing signs of improvement, jobless claims came in at 206,000 (above estimates), and the front end of the bond market quietly let some of that hike premium go.

Middle East: the war is back on. President Trump confirmed a "very heavy attack" on Iran but said it would not take "too long", while repeating his claim that the US controls the Strait of Hormuz. Oil holds a three-day rally — WTI near $90–91 after surging roughly 9% over three sessions, Brent around $96–97. The Strait remains only partially open. This is a textbook supply-side shock (a price rise caused by supply being cut off rather than by demand running hot), and normally that chain runs: oil up → inflation sticky → central bank hawkish → real rates (interest rates after subtracting inflation) up → dollar bid → gold lower.

Gold: trading 4473.04 / 4473.24. Overnight range 4381.09–4510.86; Wednesday's high/low 4397.58 / 4282.46. Gold added roughly 2.3% and broke above Wednesday's high decisively. Here is the part that matters, and it is where I got it wrong yesterday: I was short gold on the supply-shock chain above, and I was stopped out for a loss. The chain has a hidden requirement — it needs a central bank that actually tightens. When the shock lands and front-end yields fall instead of rise, the real-rate transmission is blocked, and the same inflation shock becomes gold-bullish: you get the inflation without the offsetting rise in real yields, plus direct haven demand. That is exactly what the 2-year yield told us overnight. My read has flipped, and I am now leaning long gold on weakness. For context, gold is still well below its January record above $5,600.

Crypto: Bitcoin 81,865 (RSI M15 70.9, ATR ~$304); early Sydney range 81,248–81,920, with Thursday's high/low 81,794 / 76,903. BTC added about 5.5% on the session to reclaim $81,000 and has closed above Thursday's high — a clean breakout, but an overbought one on short timeframes (RSI above 70 means price has run hard and fast relative to its recent range). Ether 2,514.45 (RSI M15 64.1, ATR ~$10); early range 2,499–2,515, Thursday's high/low 2,527 / 2,366. Ether gained roughly 5.2% but is still capped by Thursday's 2,527 high — it remains the weaker leg. Total crypto market cap rose about 4.7% to $2.82 trillion.

Key FX:

• EURUSD 1.16255 — RSI 46.6 (neutral), ATR(M15) ~3 pips. Early range 1.16237/1.16289; Thursday 1.15835–1.16411. Sitting mid-range, waiting for payrolls.
• GBPUSD 1.35288 — RSI 50.3, ATR ~4 pips. Thursday 1.34803–1.35482. Quietly firm, no conviction either way.
• USDJPY 155.897 — RSI 61.4, ATR ~8 pips. Thursday's range 155.301–158.967 — a 366-pip collapse. The yen jumped more than 1% to a one-month high after Governor Ueda said policymakers must pay greater attention to upside price risks, with the Bank of Japan decision due 18 September. Japan spent a record ¥15.4 trillion between 30 July and 26 August defending the currency, and the US joined a coordinated yen-buying effort — so intervention risk now cuts against dollar longs, not for them.
• AUDUSD 0.71990 — RSI 44.2, ATR ~3 pips. Thursday 0.71587–0.72082. Failing to capitalise on dollar weakness, which is telling.
• NZDUSD 0.58865 — RSI 57.1, ATR ~3 pips. Thursday 0.58344–0.58920. Pressing the top of its range.
• USDCHF 0.80689 — RSI 43.5, ATR ~4 pips. Thursday 0.80524–0.81319. The franc is bid; below 0.8050 opens a lot of air.

Cross-asset snapshot:

Asset	Now	vs Prior Close	Vector
S&P 500	7,747.71	+1.06%	Risk-on
US 10Y	4.75%	−5bp	Dovish at the margin
US 2Y	4.34%	−5bp	Hike odds fading
DXY	~99.6	Lower	USD soft
Gold	$4,473	+$75 vs Wed's 4,397.58 high	Bullish — policy channel blocked
Bitcoin	$81,866	+$72 above Thu's 81,794 high	Strong, overbought
Brent	~$96–97	Holding a 3-session rally	Hormuz supply risk

Normal liquidity into a first-Friday payrolls print, thinning after the New York close ahead of the US Labor Day long weekend.

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