The US dollar is mostly consolidating in narrow ranges against the G10 currencies. Japanese markets are closed until Thursday, and despite the softer rates the yen is off about 0.20% through the European morning to rival the Canadian dollar as the weakest among the major currencies. The economic diary is light today and tomorrow, ahead of Wednesday’s flash September PMI. Meanwhile, the preliminary talks ahead of this week’s Trump-Xi meeting seemed to reach a framework agreement for AI talks, but no agreement was reached, according to reports, on the extension of the tariff truce that expires in November. Still, the PBOC campaign of strengthening the yuan via the fix continued today for the ninth consecutive session.
October WTI is lower for the fourth consecutive session, the longest pullback since June. US Central Command reports that crude oil and liquified natural gas flows through the Strait of Hormuz are running at six-month highs. The drop in oil prices appears to be helping bonds in Europe and the USD recover from last week’s slide and buoying equity markets.
Prices
G10
• The euro consolidated in choppy trading within the previous day’s range before the weekend. It is confined to an exceptionally narrow range so far today of less than a fifth of a cent range above $1.1470, where options for 1.16 bln euros expire today. Nearby support is seen around $1.1450 and a break could spur a move to $1.1400. A convincing move above $1.1500 could help stabilize the tone after last week’s1% loss, the largest in a little more than three months. German state election results saw the CDU fail to secure parliament representation in Mecklenburg-Vorpommern, which saw the AfD apparently win their second state election. In Berlin, the Left Party saw its support nearly doubled to secure the most votes. Still, forming local governments will take some time, and Chancellor Merz has pledged to stay on
• Seemingly much to the surprise of the US Treasury, the yen was sold after the BOJ hiked rates ahead of the weekend. Rising US rates, arguably trumped the well telegraphed BOJ move. Moreover, as we noted, the New Zealand dollar and euro were sold following their respective rate hikes. The dollar’s response to the FOMC hike was the exception. The dollar peaked a little above JPY158 in the Europe before the weekend, and talk that the BOJ checked rates, saw it pullback to around JPY156.50 in the North American afternoon. Japanese domestic markets are closed until Thursday, and the market is wary of intervention given the nearly 3.5%-dollar rally in the past nine sessions. The greenback is consolidating between about JPY156.60 and JPY157.30. Options for nearly $2.3 bln at JPY157 expire today.
• Sterling snapped a four-day slide ahead of the weekend. Its 1% decline last week was still the largest since mid-June. Sterling recovered from $1.3335, its lowest level since late July to reach new session highs in the North American afternoon. Still, was unable to take out the previous session high ($1.3405). It is trading between ~$1.3370 and $1.3395 so far today.
• The Canadian dollar stabilized ahead of the weekend but only after falling to its lowest level since early August. The greenback reached CAD1.4015, and the gains were extended to almost CAD1.4025 today. The next technical target is around CAD1.4050. The US two-year premium over Canada ended last week above 142 bp, the most in about two months.
• The Australian dollar remained within last Wednesday’s range (~$0.7075-$0.7150) for the second consecutive session ahead of the weekend. Still, it settled firmly—its highest settlement in three sessions and above the five-day moving average (~$0.7115 today) for the first time since September 9. Yet, it is little changed within the pre-weekend range today.
EM
• The Mexican peso entered a new a lower trading range last week. The greenback rose to almost MXN17.19 at the start of last week. After the Fed hike, the dollar reached almost MXN17.2750 before consolidating with firmer bias ahead of the weekend. It is trading quietly today between about MXN17.19 and MXN17.24.
• Ahead of the weekend and encouraged by the PBOC dollar’s fix, the offshore yuan settled at its best level since early July 2022. The greenback has edged a little lower today to reach almost CNH6.6930. Officials have lowered the dollar’s fix for nineth consecutive today. The nearly two-week campaign has barely elicited a comment from the China First camp. The dollars’ reference rate was set at CNY6.7487 today (CNY6.7521 at the end of last week and CNY6.7828 at the end of August).
• The continued pullback in oil prices and firmer stock prices failed to do more than steady the Indian rupee today. The dollar consolidated within the pre-weekend range (~INR95.7135-INR95.9050).
Other Markets
• US equities were narrowly mixed ahead of the weekend. The S&P 500 fell for the second consecutive week, while the Nasdaq composite eked out a small gain. The MSCI Asia Pacific Index also fell for the second consecutive week, while Europe’s Stoxx 600 fell for the third consecutive week. Japan’s markets are closed until Thursday, but the other large bourses in the region rose today, with Hong Kong, Shenzhen, Taiwan, and South Korea rising more than 1%. Europe’s Stoxx 600 is up nearly 1% in late morning turnover. The Nasdaq Composite future is up a little more than 1%, while the S&P 500 is up nearly 2/3 of 1%.
• Benchmark 10-year yields jumped in Europe at the end of last week. The 10-year French yield jumped 12 bp and appeared to drag peripheral premiums over Germany wider. The US 10-year yield rose a little more than six basis points hovered near 5%, while the two-year yield rose almost 8 bp to a new high since July 2024 (~4.75%). DBRS, the fourth major rating agency tracked by the ECB cut the French outlook to negative ahead of the weekend and Moody’s cut Poland’s rating to A3, which is equivalent to the A- rating of S&P and Fitch. The new week has begun with a sharp pullback in European yields. French and Italian benchmark yields are off 10-12 bp, while most other yields are 6-8 bp lower. The yield on the US 10-year Treasury is off a little more than four basis points to 4.95%, and the two-year yield is off about 2.5 bp to 4.72%.
• Despite the rising yields, gold posted its highest close in a week-and-a-half (~$4383). It stalled in front of $4400 and pulled back to about $4340 today. Silver also posted its best settlement in a week-and-a-half ($66.50). It has also pulled back today to about $65.75.
• October WTI peaked early last week, near $106.75, and settled below $100 before the weekend. The 2.2% drop before the weekend was sufficient for the contract to snap a two-week 19% rally. The heavier tone has carried into today’s activity. October WTI has been sold to a seven-day low slightly below $97.70. The $96.40 area corresponds to the (38.2%) retracement of the leg up that began in late August.
Data
• With last week’s FOMC decision behind us, public speeches by Fed officials resumed. Governor Bowman spoke on bank stress tests last week and KC Fed President Schmid (non-voter this year) addressed payments and banking ahead of the weekend. Chicago Fed’s Goolsbee, who also does not vote this year, speaks today on monetary policy. NY Fed President Williams (NY Fed President always has a vote) delivers the keynote address at the Treasury Market Conference tomorrow. As the vice chairman of the FOMC, the NY Fed’s views are often aligned with the Fed’s leadership. Richmond Fed President Barkin (non-voter this year) speaks tomorrow at the CFA Society in Baltimore.
• As widely anticipated, Chinese banks kept the loan prime rates steady at 3.0% and 3.50% for the one-year and five-year tenors, respectively.
Reviewed by Marc Chandler
on
September 21, 2026
Rating:
