For the Dollar, Alaska is theatre — Economic data provides the script that matters

Trump and Putin may be striding into the Elmendorf-Richardson base tonight under the midnight sun. Still, the FX market has been clear all week: the big moves in the greenback are being inked in economic data, not Alaska’s optics. Yesterday’s PPI print didn’t just come in hot — it set the Fed’s September cut narrative smouldering, forcing traders to scribble hawkish risk back into their playbooks. The result? A more balanced dollar risk profile, with Fed repricing tugging one way and geopolitics pulling — tentatively — the other.

The summit is being sold as a “feel-out” session, with Trump hinting that talks with Ukraine and European allies will follow, and even admitting there’s a one-in-four chance nothing comes of tonight’s handshake. That 25% “nothing-burger” scenario is ironically the most dollar-positive — a clean avoidance of risk-on de-escalation. Anything more conciliatory could shave some of the buck’s recent geopolitical premium, but it’s unlikely to overpower the hawkish PPI shock still rippling through the curve. Oil remains the transmission channel to watch — any ceasefire headlines would filter into FX via crude.

Timing is awkward: at 20:30 BST, headlines could hit in late US trading, but with Monday Asia likely to carry the brunt of the reaction. Until then, the greenback’s drivers remain domestic. PPI’s 0.9% m/m surge was no rounding error — with its habit of front-running CPI and feeding directly into the Fed’s core PCE gauge, it’s a live-wire number. September’s cut still looks nailed-on in market pricing, but the December OIS contract has already shifted from -64bp to -57bp, and two-year swap rates have ticked higher. If hawkish repricing sticks, it can easily offset any dollar dip from geopolitical relief.

Today’s US calendar keeps the macro flame lit: retail sales (expected to match June’s 0.6%), the Empire State manufacturing read, and the University of Michigan’s economic and inflation surveys, plus TIC flows — where, against all the armchair hot-takes of a Treasury buyers’ strike, foreign demand has quietly refused to die.

For the euro, Alaska carries more weight. A path toward cheaper, structurally stable energy prices could ease the eurozone’s battered terms of trade and lift long-term fair value, even against a still-unattractive rate profile. But traders have been burned on “first-step” optimism before; without a clear de-escalation, EUR/USD momentum remains tied to US data. A return to 1.180 needs softer US macro to grease the wheels.

The yen found some teeth this week, snapping higher on the back of an upside GDP shock that showed Japan’s export engine still humming despite Washington’s latest tariff grenades. The print wasn’t just respectable — it was a reminder that the trade channel isn’t buckling under the U.S. squeeze, at least not yet.

By late Asia, USD/JPY was down 0.4% to 147.12, with the yen also chalking up 0.3% gains against both the euro and sterling. The move got an extra shove from U.S. Treasury Secretary Scott Bessent, who all but accused the Bank of Japan of dozing through the inflation risk, warning they might be “behind the curve.” That kind of headline sticks in a market already sniffing for the next BoJ policy tweak.

Layer the GDP beat over Bessent’s jab, and you’ve got a recipe for firmer rate-hike expectations out of Tokyo — a shift that traders know can put more wind in the yen’s sails. With the dollar softening on the week, the yen’s up close to 0.5%, and momentum could extend if U.S. yields stay capped and the BoJ chatter grows louder.

Oil: Off the mat, but still glass-jawed. Crude’s bounce from two-month lows to north of $63 was stitched together in thin, late-summer liquidity, where even small orders can feel like tidal waves. And while the Alaska Summit is being framed as a sanctions-defining showdown, the base case in most trading rooms is underwhelming.

Even in the rosiest peace scenario, Nord Stream and Yamal aren’t coming back online any time soon, politically toxic as they are post-sanctions. Ukrainian transit flows would need fresh long-term contracts with Europe — a political migraine no one’s eager to invite. On the other side, if talks break down and tensions flare, the knee-jerk is a sanctions pop in crude. But Russia has proven its barrels are stubborn — moving in size with discounts deep enough to keep India and China in the fold. Unless the US goes full-bore on enforcement, the taps won’t close.

Bottom line — this isn’t a summit that flips a supply switch. Russian output is boxed in by more than sanctions; OPEC+ quotas and years of under-investment have hard-capped capacity. The real oil trade is about timing the fade in war premium, gaming low-liquidity August tape, and deciding whether tonight’s meeting drops a headline worth chasing — or just another summer lull for the market to roll over and hit snooze.