Last Sunday I wrote that the dollar no longer reacted to hawkish news. This week it did. The dollar index rose 1.3 percent. But look at why, and you see something more important than the dollar itself. The market has stopped listening to what central banks say. It counts the votes.

1The Fed: the unity was the message

The hike to 4.00 percent was priced in at 90 percent, no story there. What hit was two things. The vote: 12 to 0. And the projection for 2027: 4.1 percent, up from 3.6 in June. So no cuts next year either. Warsh left his own dot in the dot plot blank, again, and said outright that he is not in the forward guidance business. Gold fell 100 dollars within half an hour.

But here is what few commented on: the 10-year yield, which had gone above 5 percent for the first time since 2007 in the days before the decision, fell back to 4.94 after it. The Fed said "higher for longer", and the long yield fell. That is not a contradiction. The bond market pays for credibility, not for low rates. Last week I wrote that the state buys and the market sells. The Treasury's 6 billion buyback didn't bite. Twelve unanimous votes did.

2Japan and England: the split was the message

The Bank of Japan hiked to 1.25 percent, the highest in 31 years. The yen still fell 1.2 percent. Not because the hike was wrong, but because two board members voted against, both appointed by Prime Minister Takaichi, and because Ueda refused to say anything about the pace ahead. The market read it as politics sitting at the table. The same day the Bank of England held at 3.75, but three of nine wanted to hike. The pound weakened.

Put it together. The dollar won the week not on its own strength but because the others looked weaker. One united central bank was rewarded, two divided ones were punished. It is the simplest explanation I can find for this week's currency moves, even though the dollar index is measured against precisely the yen and the pound, and Japan had more reasons to fall than the vote. It is a reading worth testing into the autumn, with the Riksbank as the first trial.

3The dollar as a weapon: the next act plays in Washington

BRICS signed off on its payment system last weekend. This week that front was quiet, but next week Xi Jinping visits the US. It is the first time since the sanctions threat against countries trading with Iran, and one week after China signed up for trade in local currencies. I don't expect headlines about the dollar, but it is in those meetings the pipes get laid.

Oil: the market found a way around

Brent peaked at 108 on Monday when Saudi Arabia's pipeline to the Red Sea was knocked out. Then the interesting part happened: the Saudis started shipping 2.8 million barrels a day through Hormuz, against 0.7 in August, and transferred cargo to tankers outside the strait. Brent closed the week at 103. Above 100 all week, but the market learned that supply finds a way. That is also why the long yield could fall on Friday.

The week ahead

• Thursday: the Riksbank. CPIF at 0.7 percent, the rate is expected to stay at 1.75. Sweden stands still while the world hikes, and the krona takes the hit.
• Friday 14:30 CET: PCE, the Fed's own inflation measure. The first print after the hike.
• Xi Jinping in the US. Watch what is not said about the dollar.
• More than ten Fed officials speak. After Warsh's silence, every word will be parsed.

Unity gets rewarded

Three central banks, three decisions, one single explanation for how the market reacted: the votes. The Fed was united and got both a stronger dollar and a lower long yield. Japan and England were divided and got weaker currencies despite hawkish policy. As long as oil stays above 100, every rate decision will be a credibility test rather than a rate decision. Next week it is the Riksbank's turn, and it cannot afford to look divided.

Last Sunday I wrote that a Fed hike was about to become the base case. After Friday's inflation print the market now prices roughly 90 percent for a hike on Wednesday. But the most important thing this past week was the dollar's reaction to that news. There wasn't one.

1Inflation: hot core, cold dollar

Friday's inflation came in at 3.4 percent, as expected. But core inflation, the one the Fed watches most, rose 0.3 percent in a month, more than expected. That should have lifted the dollar. Instead the dollar index closed the week unchanged at 99, and gold and silver even rose on Friday. A hawkish Fed used to give the dollar a lift. Now it isn't enough. That is the erosion I talked about, visible in real time.

2The national debt: the state buys, the market sells

The Treasury tripled its buybacks of long-dated bonds to 6 billion dollars on Wednesday. The 10-year yield still rose to 4.96 percent, one step from 5. At the same time the ECB hiked to 2.50 percent and Japan is expected to hike on Friday. The whole world is hiking while the US tries to push its own long-term rates down. It doesn't add up, and the market knows it.

3The dollar as a weapon: BRICS builds pipes, not a currency

This weekend eleven BRICS countries meet in New Delhi. India says no to a common currency and calls it "derisking, not de-dollarisation". But at the same time BRICS Pay is being launched, linking the payment systems of China, Russia, India and Brazil. Nobody is replacing the dollar. They are building around it. Exactly what China has done since 2012.

Oil drives everything

Brent peaked at 107 this week after the US sank eight Iranian tankers and Saudi production fell. Expensive oil keeps inflation up, which forces central banks to hike, which pressures bonds. All three points above are linked in that chain.

The week ahead

• Wednesday 14:30 CET: US retail sales.
• Wednesday 20:00 CET: the Fed decision. The hike is priced in; what moves the market is the projections and what Warsh says about October.
• Thursday: Bank of England. Friday: Bank of Japan, expected to hike.

What I'm watching this week

Wednesday's hike is priced in. What matters is two things: the projections, meaning whether the Fed sees more hikes ahead, and what Warsh says about October. A hike described as a one-off is received very differently from the start of a series. Add Japan on Friday, expected to hike for the first time in a long while, and you have a week in which the world's entire rate map is redrawn.

Last weekend I wrote that Fed chair Warsh could give the dollar a temporary lift by talking about inflation, and that this was where my thesis would be tested. The test came on Friday.

1The jobs report: the dollar won the first round

The US jobs report showed 162,000 new jobs, three times more than expected. A strong labour market means the Fed doesn't need to cut rates to help the economy. The market went from expecting a cut to now betting on a hike on 16 September. Higher rates make the dollar more attractive, so the dollar rose and gold and silver fell a little over one percent. Short term, exactly what I flagged happened.

2The national debt: two hands pulling in opposite directions

The US government is now buying back its own long-dated bonds at twice the previous scale, at least 4 billion dollars per round, with the first round this Thursday. Put simply: the state props up its own debt while the central bank talks about raising rates. That's why I'm not changing the long-term picture.

3The dollar as a weapon: China has spent fourteen years building around it

This is the point I think is most important to understand. I wrote that the more the US uses the dollar as a weapon, the more countries look for alternatives. The article below shows what that looks like in practice.

• In 2012 the US sanctioned a small Chinese bank for doing business with Iran.
• That same year China began building its own international payment system, CIPS. Today 210 banks are directly connected.
• China still needs the dollar; the big banks can't risk being shut out.
• So Iranian oil is bought through small refineries and small banks the US can't reach, paid in yuan outside the dollar system.

Bessent's threat last week therefore hits a system China has had fourteen years to build. That's why the rest of the world shrugged.

The week ahead

Monday is Labor Day in the US. The New York exchanges are closed, but index futures trade until 19:00 Swedish time, gold, silver and oil (WTI) until 20:30, then everything reopens at midnight. FX trades as usual. Expect thin volume and moves that don't say much; the real week starts on Tuesday. Check your broker's exact hours, they can differ by a quarter of an hour.

The Fed can't comment the week before a rate decision, so the numbers have to speak for themselves.

• Thursday: producer prices (PPI) and the state's first big bond buyback.
• Friday: inflation (CPI), the last reading before the Fed decides.

High inflation strengthens the dollar further and gold and silver could have a tough time short term. Calm inflation can turn the picture quickly.

Zoom out

Every sanction adds another piece to the system built to function without the dollar. You don't see it in this week's prices, you see it in the dollar's share of the world's currency reserves being the lowest in 25 years. Gold around 4,400 dollars and silver around 66 dollars are, to me, still a long-term case.

As you know, macroeconomics and geopolitics are a big interest of mine. After the summer break I'm getting more active and devouring information to judge what's clickbait and what's actually worth watching. I usually use the weekends to set my sights on the coming week. I'm going to start sharing more of my thinking.

Below is worth watching a little extra right now.

1. The US national debt has passed $40 trillion and the Treasury is now buying back its own bonds – the market reads it as more money printing, which would weaken the dollar. New Fed chair Warsh did, however, flag on Friday that inflation is still too high, which can give the dollar temporary support – that's where the thesis is tested.
2. The US is now threatening to shut countries that trade with Iran out of the dollar system – aimed mainly at China. Short term not much happens to the dollar; it's driven mostly by the Fed and rates. But long term this is big: the more the US uses the dollar as a weapon, the more countries look for alternatives – the dollar's share of the world's currency reserves is already the lowest in 25 years.

Slow erosion rather than collapse, but it strengthens the long-term case for gold & silver. See finance minister Bessent's statement here 👇