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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

At least eleven civilians were killed on Saturday after a rocket struck northern Israel, in the deadliest incident since hostilities began between the country and Lebanon-based Hizbollah last October.  

The rocket struck a football pitch in the Druze town of Majdal Shams, in the occupied Golan Heights, where children and teenagers were congregating, according to Israeli health authorities. Twenty people were injured.

Daniel Hagari, Israel’s chief military spokesperson, said it was the deadliest attack on Israeli civilians since Hamas’s October 7 assault that triggered the war in Gaza.

“We witnessed great destruction when we arrived at the soccer field . . . the scene was gruesome,” said an Israeli first responder.

The Israel Defense Forces (IDF) blamed Iran-backed Hizbollah. “According to all our intelligence and assessments, this is a Hizbollah attack,” said an Israeli military official.

In an unusual move, Hizbollah denied responsibility for the strike. But the group controls southern Lebanon and has been trading cross-border fire with Israel for nearly 10 months.

Hizbollah “had absolutely nothing to do with the incident and categorically denies all false allegations in this regard,” the group said in a statement.

Hizbollah began to fire on northern Israel the day after Hamas militants attacked Israel from the Gaza Strip on October 7 last year, saying it was acting in solidarity with the Palestinian militant group.

The rocket that hit Majdal Shams was one of dozens of projectiles and drones fired from Lebanon into northern Israel on Saturday afternoon, according to Israeli officials. Hizbollah said it had targeted multiple Israeli military installations in north-eastern Israel and the Golan Heights in retaliation for Israeli air strikes on several Lebanese border villages earlier in the day.

One strike on the village of Kfar Kila, which Israel said was aimed at a “terrorist cell” and weapons storage facility, reportedly killed three Hizbollah members.

According to Israeli data, before Saturday’s attack 29 Israelis, including 11 civilians, had been killed in northern Israel since the start of the Gaza war.

More than 350 Hizbollah fighters, including some mid-to-high ranking officers and commanders, and more than 100 Lebanese civilians have been killed in the hostilities so far, according to an FT estimate. 

Israeli Prime Minister Benjamin Netanyahu was set to hold consultations with his security chiefs later on Saturday, according to his office. The premier, who is still in the US after last week addressing the US Congress and meeting President Joe Biden, Vice President Kamala Harris and ex-President Donald Trump, said he was seeking to return to Israel earlier than planned.

Despite months of rising hostilities, the tensions between Israel and Hizbollah have not yet escalated into an all-out war. Yet the conflict on the Israel-Lebanon frontier has displaced some 200,000 people.

The Lebanese militant group has vowed to continue its attacks until the war in Gaza ends. For their part, Israeli officials have said that they are committed to returning the residents of northern Israel back to their homes, either through US-backed diplomacy or via “other means,” as Netanyahu has put it.

Earlier on Saturday, around 30 people were killed in IDF air strikes which targeted a school in central Gaza housing displaced people, according to health authorities in the Hamas-run enclave.

The Israeli military said Hamas militants were using the Khadija school as a “hiding place to direct and plan . . . attacks” and to store weapons.

The attack came after the IDF announced it was further “adjusting” an Israeli-designated humanitarian “safe zone” in the southern Gaza city of Khan Younis, ahead of a planned offensive in the area. Last week Israel renewed operations in the city, shrinking the “safe zone” and calling on Gazans to evacuate to the nearby Al-Mawasi coastal strip.

“Remaining in this area has become dangerous,” the IDF said in a statement on Saturday.

Gaza ceasefire talks were set to resume on Sunday at a summit in Rome, with the participation of US CIA chief Bill Burns, the head of Israel’s Mossad David Barnea and Egyptian and Qatari officials.

Negotiations have stalled for several months due to fundamental gaps between Israel and Hamas. Israel on Saturday provided the US, Egyptian and Qatari mediators with an official response to the latest draft proposal, according to an Israeli official.

As vigils for Sonya Massey take place across the US this weekend, a history of unethical and aggressive behavior by the officer who shot her, Sean P Grayson, is emerging. Grayson’s disciplinary file includes accusations of bullying behavior and abuse of power, according to CBS News.

Sonya Massey, a 36-year-old Black woman and mother of two living outside Springfield, Illinois, had called 911 when she thought a prowler was lurking outside her home on 6 July. Grayson and another officer from the Sangamon county sheriff’s office were dispatched and arrived at her home. Instead of helping Massey with a possible intruder, Grayson shot her in the face after she moved a pot of water from her kitchen stove at their request.

Grayson, who is white, has pleaded not guilty to charges 0f first-degree murder, aggravated battery with a firearm and official misconduct in Massey’s killing. He was fired last week by the Sangamon county sheriff’s office and has been jailed without bond.

Captured on bodycam, Grayson can be heard yelling: “You better fucking not. I swear to God I will fucking shoot you right in your fucking face.” Both deputies screamed at Massey to drop the pot. Massey cowered behind the counter, saying “I’m sorry” twice before Grayson shot her three times.

The 26 July CBS report on Grayson’s disciplinary file included an audio recording of Grayson’s previous supervising officers saying, “The sheriff and I will not tolerate lying or deception,” to Grayson, and “officers [like you] have been charged and they end up in jail”.

The recordings date back to November 2022 and were released by the Logan county sheriff’s office, north-east of Sangamon county, where Grayson had worked from May 2022 to April 2023. The disciplinary file describes Grayson’s behavior as bullying and an abuse of power, specifically citing a lack of integrity, lying in his reports and misconduct.

Wayman Meredith, the police chief of Girard, Illinois, recalled, “He was acting like a bully,” over the phone to CBS about Grayson. Meredith spoke about an alleged incident last year, describing Grayson as “enraged” and pressuring him to call child protective services on a woman outside of the home of Grayson’s mother. “He was wanting me to do stuff that was not kosher,” Meredith added.

According to the CBS report, Grayson worked in six different law enforcement agencies in four years.

“Why did he even have a job as a sheriff’s deputy after those red flags?” said Ben Crump, the family’s lawyer, at a press conference.

On the same day the CBS report was aired, Kamala Harris called the Massey family to offer condolences, according to family members who spoke to NBC News.

Massey’s father, James Wilburn, told NBC News that the vice-president’s call “made me feel a lot better today”. He added that Harris “gave us her heartfelt condolences, and she let us know that she is with us 100%, that this senseless killing must stop”.

Harris, the presumptive 2024 Democratic presidential nominee, issued a statement on 23 July following the release of the body-camera footage. “We have much work to do to ensure that our justice system fully lives up to its name,” she said.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

A dramatic rebound in the yen has sent shockwaves across global markets and left the currency on course for its best month this year, setting the scene for further volatility around Japanese and US central bank meetings this week.

The yen has leapt 4.7 per cent against the dollar in July, helped by the possibility that the Bank of Japan could raise interest rates on Wednesday, narrowing the yawning gap with Federal Reserve borrowing costs that had driven the currency to a string of multi-decade lows. Expectations of Fed cuts have also ramped up following a fall in US inflation earlier this month.

The currency’s recovery has been turbocharged by the unwind of popular “carry trades”, where investors borrowed in yen to fund the purchase of higher yielding currencies and had pushed bets against the yen to their most extreme levels for around two decades. 

Analysts say that as investors have rushed to cut their losses on misfiring carry trades, they have been forced to sell assets in other corners of markets, adding fuel to a sharp sell-off in global tech stocks.

“The FX market is moving everything right now, because yen-funded carry trades have been one of the most popular trades this year — cutting the positions is affecting other risk positions as well,” said Athanasios Vamvakidis, global head of foreign exchange at Bank of America. 

While the yen stabilised on Friday, forex traders say volatility will intensify next week as markets prepare for a knife-edge interest rate decision by the Bank of Japan and adjust to a global shift in risk appetite and the massive unwinding of speculative currency positions. 

The predictions, made by traders in Tokyo at three investment banks, came at the end of a week in which the yen surged from ¥157.5 against the dollar to ¥153.71.

But traders also warned that a BoJ decision on Wednesday to leave interest rates untouched could trigger a rapid reversal for the yen, sending it back on course towards the ¥161 per dollar low at which the Japanese authorities are suspected of having intervened in mid-July.

“Things really could get interesting next week for the yen, because the set-up going into the BOJ meeting is very different given that market sentiment towards the carry trade has clearly changed,” said Benjamin Shatil, FX strategist at JPMorgan in Tokyo.

“There are still a lot of short yen positions out there, which could be unwound if we get a move through 152. At the same time, if the BOJ refrains from making any substantial announcement, there might be very little resistance to the yen falling back,” he added.

Traders in swaps markets are evenly split on the prospect of the Bank of Japan lifting its key rate 0.15 percentage points to 0.25 per cent next week, up from a probability of a quarter earlier this month. 

Looming over this has been the influence from the US political scene, including comments by Donald Trump that the US had a “big currency problem” because of the weakness of yen and yuan, signalling he might explore different options for weakening the dollar if he wins the presidential election in November. 

That has played alongside the heavy sell-off on Wall Street led by tech shares.  

“The most crowded fund manager trade had been long tech stocks and in FX it’s been short yen . . . this week has seen the most crowded trades unwind and I’m sure there was some cross over between the two,” said Chris Turner, global head of research at ING.

BoJ-watchers believe that the currency moves have placed the central bank in a difficult position, as the current economic situation appears to justify a small rate increase. If the BoJ decides not to move, said analysts, the market may decide that it has held back because the yen is now stronger, allowing the market to interpret the decision as purely reactive.

“Over the last two years people have made a lot of money shorting yen . . . there will be a bias to jump back in if the BoJ doesn’t lift rates,” said Turner.

Additional reporting by Kate Duguid in New York