The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0717 GMT - Bitcoin declines, reversing last week's rise when it hit an over three-month high of $82,164, as investors become cautious. Uncertainty around the U.S. Federal Reserve rate decision on Sept. 16 is causing traders to take precaution, IG's Chris Beauchamp says in a note. Markets price in a 57% chance of a Fed rate increase this month, LSEG data show. Bitcoin falls 1.2% to last trade at $78,298. (miriam.mukuru@wsj.com)
0713 GMT - The dollar falls to a two-week low against a basket of currencies as strong gains for the Japanese yen continue. The yen jumps to a six-month high against the U.S. currency, boosted by expectations of faster interest-rate increases by the Bank of Japan and potential for domestic investment inflows. "This still looks primarily like a yen story rather than evidence of a broader shift in sentiment towards the dollar," ING's Francesco Pesole says in a note. Investors meanwhile await Friday's U.S. inflation data, he says. The DXY dollar index is last down 0.3% at 98.882, having hit a low of 98.716. The dollar hit a six-month low of 152.87 yen in Asian trade, according to LSEG data. (jessica.fleetham@wsj.com)
0658 GMT - Potential trade restrictions on Chinese companies are likely to have limited impact on China's exports, according to Barclays economists in a research note. AI-related trade frictions may intensify, the economists say, referring to reports about the Trump administration considering restrictions on select Chinese data-centre components. Barclays believes the impact will remain limited given "the small export share of the targeted products and the increasing diversification of Chinese exporters into other fast-growing markets," the bank says. (tracy.qu@wsj.com)
0648 GMT - Eurozone government bond yields are marginally lower, awaiting the European Central Bank's interest-rate decision and potential hints at the future policy path on Thursday. A 25 basis-point rate increase is fully priced in, according to LSEG. However, investors will want to know whether the ECB is overly concerned about further inflation risks and thus whether it is ready to raise rates further in the coming months. The widely-expected 25-basis-point hike would bring the deposit rate to 2.50%. The 10-year German Bund yield edges lower by 0.3 basis points to 3.379%, while the 10-year French OAT yield is down 0.1 basis point at 4.244%, according to Tradeweb. (emese.bartha@wsj.com)
0647 GMT - China's exports are likely to remain a key growth support in 2H, according to Barclays economists. Full-year exports are likely to grow around 20%, up from 17.6% in 1H, helping to partially offset weak domestic demand, they say in a research report. "We think external demand will continue to benefit from the global AI investment cycle and energy transition, supporting sectors such as EVs, power equipment, robotics, and data-centre-related infrastructure," the economists say. Industry reports continue to point to robust export order backlogs across a range of AI- and green-tech-related products, they add. (tracy.qu@wsj.com)
0557 GMT - The Philippine peso is unlikely to strengthen significantly as there are limited catalysts, UOB Global Economics & Markets Research analysts say in a report. The peso has been hitting record low against the dollar in recent weeks. Its underperformance largely reflects the Philippines' vulnerability to higher energy prices, supply security and the Fed's policy trajectory. Investor sentiment could also still be weighed by persistent macroeconomic imbalances as well as domestic, political and policy uncertainties. The dollar was last 0.1% lower at 62.507 pesos, LSEG data shows.(amanda.lee@wsj.com)
0553 GMT - Jefferies maintains concerns about long-end bonds, given potentially more risks from inflation and fiscal expansion, global economist Mohit Kumar says in a note. "We have been in the optimistic camp for the [U.S.-Iran] war and still believe that a deal, even if it's a fudge, may be feasible before the [U.S.] mid-terms," he says. "But we would still have the impact from El Nino and food prices," he says. In 2027, over 60% of European GDP is going through an election cycle, which implies a likelihood of fiscally supportive measures, Kumar says. "Hence, while we think that we could get a pullback in yields in the near term, our medium term view remains one of avoiding the long end and favoring steepeners on the curve." (emese.bartha@wsj.com)
0548 GMT - The Federal Reserve's interest-rate decision on Sept. 16 "will come down to something of a coin toss as Fed officials balance the outlook between persistent price pressures (inflation) and making policy restrictive," First Abu Dhabi Bank's Simon Ballard says in a note. Market pricing underpins this view as money markets currently price in a 58% probability of a 25-basis-point hike against a 42% chance of unchanged rates, according to LSEG. The chief economist adds that "there will also be the 'not insignificant' matter of [U.S. President] Trump and [Vice President JD] Vance continuing to protest the case for rates to be cut." (emese.bartha@wsj.com)
0541 GMT - Any additional interest-rate hikes by the European Central Bank beyond a widely-expected 25-basis-point raise on Thursday would take the deposit rate above the upper bound of the ECB's neutral rate estimates, Pimco's Konstantin Veit says in a note. Pimco expects an extended pause beyond September, "although any emerging risks to inflation expectations could compel the ECB to continue its hiking efforts," the portfolio manager says. If the ECB is indeed able to conclude its hiking campaign at 2.5%, "we believe it will aim to preserve valuable conventional policy space, and is unlikely to reverse these hikes next year." Any additional hike would likely require either a fresh energy shock, evidence of second-round effects in wages, or a de-anchoring of inflation expectations--Pimco currently sees none of these in the data. (emese.bartha@wsj.com)
0527 GMT - Government bond supply in the eurozone will pick up Tuesday, with the Netherlands, Austria and Germany lining up for bond auctions. The Netherlands will offer 2.5 billion euros to 3 billion euros in the July 2036-dated bond, known as DSL. Austria will auction a combined 1.438 billion euros in October 2030- and February 2036-dated bonds. Germany will auction 750 million euros in February 2033- and 750 million euros in May 2041-dated green Bunds. (emese.bartha@wsj.com)
0521 GMT - U.S. Treasury yields edge lower in Asian trade as their trade resumes after Monday's Labor Day holiday, shrugging off a slight increase in oil prices. The key anticipated driver of U.S. Treasurys this week will be Friday's CPI reading, in particular ahead of the Federal Reserve's rate decision on Sept. 16. "Last week's payroll numbers were stronger than expected, confirming markets' hawkish bias for the upcoming Fed meeting," ING senior rates strategists Benjamin Schroeder and Michiel Tukker say in a note. "But with around 60% of a rate hike priced in, the audience remains split," they say. The two-year Treasury yield falls 1.3 basis points to 4.363% and the 10-year yield is down 0.4bps at 4.779%, according to Tradeweb. (emese.bartha@wsj.com)
0510 GMT - The front end of eurozone government bond curves has already repriced materially on the renewed inflation risk, and there has also been spillover from other government bond markets, Mediolanum International Funds Limited's Niall Scanlon says in a note. "Should the ECB endorse market pricing at this meeting, there is scope for yields to continue pushing higher," the fixed income portfolio manager says. However, a more balanced tone, and recognition that inflation remains primarily energy-driven with few second-round effects should offer some relief to eurozone bonds, he says. Money markets fully price a 25-basis-point rate hike on Thursday, bringing the deposit rate to 2.50%, and see the peak of the rate path just below 3% around mid-year 2027, according to LSEG.
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