Good morning traders from a sunny 19°C Amsterdam, with a surprisingly bright start around IntelliTrade HQ before temperatures settle near 20°C this afternoon. Coffee is on the desk, September has arrived, and the first thing jumping out at me is not the dollar. It is bonds. The U.S. 10-year yield is around 4.78%, Japan’s 10-year has reached 3% for the first time in three decades, European long yields are pushing into multi-year territory, and Brent is back above $91. That is a lot of inflation and policy stress for one Tuesday morning.
Overall Market Sentiment:
The mood is cautious and defensive.
Oil is higher, global borrowing costs are rising and equities are struggling to get comfortable with the idea that several major central banks may tighten policy this month. The Fed is back in that conversation after Jackson Hole, but so are the ECB, BOJ and RBNZ.
That distinction matters because the dollar is not getting the normal benefit from rising U.S. yields.
My actual view today is that USD still has policy support, but the yield story has become global enough that the relative advantage is weaker. If everyone’s yields are rising, a 4.78% U.S. 10-year does not tell the same FX story as it would if European and Japanese yields were sitting still.
The mistake here would be reducing today to “higher yields equal stronger dollar.”
Look at where the yields are rising first.
Geopolitics:
Renewed fighting around Iran has put energy straight back into the inflation story, with Brent above $91 and European natural gas prices sitting around their highest area in several years.
The U.S. has warned that further action against Iran remains possible, while the wider regional situation is keeping uncertainty around Gulf energy supply elevated.
That is why yesterday’s oil rebound matters beyond crude itself.
Higher energy costs are now pushing in the same direction as central-bank tightening expectations. Europe feels that through gas and imported inflation. Japan feels it through its energy bill. The Fed sees another reason not to become comfortable too early.
I would not overcomplicate this. Oil above $91 does not automatically create another inflation wave.
But it absolutely makes the job harder for central banks that were hoping energy pressure would keep fading.
Macro Calendar:
Today
- China manufacturing: The private manufacturing PMI climbed to 51.5 in August from 50.9, showing stronger production, new orders and exports. That looks much better than Monday’s official PMI at 49.8. The cleaner read is that China’s factory and export side is improving, especially around technology demand, while the wider domestic economy remains much less convincing.
- Euro-area manufacturing: August manufacturing PMI came in at 52.7, the strongest reading in more than four years. New orders improved sharply and employment finally stabilised after years of factory job losses. This matters because EUR is starting to get actual European growth support instead of relying entirely on softer U.S. data.
- Euro-area CPI, around 11:00 Amsterdam time: Markets expect headline inflation near 3.3% in August after Germany reported 2.9%. Energy is doing some of the damage, while German core inflation stayed calmer. A firm euro-area number would reinforce expectations for another ECB increase this month.
- U.S. JOLTS job openings, 16:00 Amsterdam time: June job openings were around 7.36 million. Today’s July report matters because Friday’s payroll number is now effectively deciding whether the Fed can follow through on Kevin Warsh’s inflation warning.
- U.S. ISM manufacturing, 16:00 Amsterdam time: I would focus on employment and prices as much as the headline activity index. AI-related investment is keeping parts of U.S. manufacturing resilient, but higher oil and borrowing costs can quickly change the inflation side of that picture.
The rest of this week
- Wednesday, RBNZ: New Zealand is expected to raise its policy rate from 2.50% to 2.75%. The difficult part is that the RBNZ would be tightening with unemployment at 5.6%, so the guidance matters more than the headline decision.
- Wednesday, Bank of Canada: The BoC is expected to remain at 2.25%. Canada has reasonable labour data and expensive oil, but the trade dispute with the United States gives policymakers a very obvious reason to be careful.
- Wednesday, Australian GDP and U.S. private employment: Australia needs growth to settle the argument between hot inflation and weaker jobs. U.S. employment estimates start building the runway into Friday’s payroll report.
- Thursday, U.S. jobless claims and ISM services: Services have remained one of the stronger parts of the American economy. If labour indicators weaken while services stay resilient, the Fed problem remains complicated rather than recessionary.
- Friday, U.S. nonfarm payrolls: This is still the big one. Markets expect only a modest improvement after July’s employment decline. I care about unemployment, wages, hours worked and revisions just as much as the headline because those details tell us whether labour demand is stabilising or continuing to deteriorate.
Currency Outlooks:
⚖️ USD - Higher Treasury yields are not giving the dollar the usual lift
The dollar index is around the 99.6 to 99.8 area, with EUR/USD near 1.1600, GBP/USD around 1.3540 and USD/JPY hovering around 159.8 to 160.0.
The U.S. 10-year Treasury yield is around 4.78%, its highest level since early 2025.
On paper, that should look fairly supportive for the dollar.
But it is not happening in isolation.
Japanese yields are exploding higher. European yields are climbing. Australian yields are rising. Several major central banks are being repriced toward further restriction at the same time.
That weakens the relative advantage.
The Fed story still supports USD because markets now see roughly a two-thirds probability of another September increase after Warsh’s Jackson Hole speech.
But today’s JOLTS and ISM numbers start testing whether the economy can actually absorb that policy path.
The cleaner read for me is mixed with a mild strength bias.
USD becomes more convincing if labour demand holds up and manufacturing prices remain firm.
That bias weakens quickly if JOLTS shows another meaningful deterioration before Friday’s payroll report.
🔺 EUR - Europe finally has growth and inflation pointing the same way
EUR/USD is holding around 1.1600, remarkably stable considering the rise in Treasury yields.
That makes more sense when you look at Europe.
Manufacturing PMI reached 52.7.
German factory momentum improved.
New orders across the euro area accelerated.
And inflation is expected around 3.3%.
That combination keeps another ECB increase very much alive.
The complication is energy.
Brent above $91 and European gas prices near multi-year highs are not the kind of inflation the ECB wants. They make households poorer while raising business costs at the same time.
Still, risks lean modestly toward EUR strength because the euro finally has its own relative policy and growth support.
The part I would not misunderstand is that stronger EUR does not necessarily mean Europe has suddenly become a great growth story.
It means the gap with the United States has narrowed.
⚖️ GBP - High UK yields are both support and warning
GBP/USD is trading around 1.3540.
Sterling remains reasonably resilient, but the UK yield story is starting to look uncomfortable.
British long-term borrowing costs have climbed sharply along with the rest of the global bond market. That can initially support GBP through the rate differential, but there is a point where high yields stop looking attractive and start looking restrictive for households, mortgages and government finances.
There is no major UK release today.
The cleaner read for me is balanced.
Sterling still has a reasonably firm policy foundation, but I would not treat rising gilt yields as an uncomplicated GBP positive.
⚖️ CAD - $91 oil helps, trade uncertainty still hurts
CAD has two very different stories heading into tomorrow’s Bank of Canada decision.
Brent above $91 is supportive for Canada’s external income position.
Recent employment data have also looked reasonably resilient.
Then there is trade.
The dispute with the United States has become a proper economic risk, not just background political noise. That makes additional Canadian policy restriction harder to justify even if energy keeps headline inflation uncomfortable.
Risks are balanced.
The BoC can sound cautious on inflation and cautious on growth at the same time. Tomorrow’s communication should tell us which side currently carries more weight.
🔺 CHF - Global bond stress keeps the defensive story alive
CHF has a useful environment today.
Global government bonds are under pressure, geopolitical tensions are elevated and equity markets are cautious.
Normally, USD would dominate that defensive story because it also offers higher yields.
The difference today is that some of the stress is coming from global fiscal and bond-market concerns themselves.
That makes the franc more relevant.
Risks lean modestly toward CHF strength while bond volatility remains elevated.
The limitation remains obvious: U.S. short-term yields are still much higher, so CHF needs genuine defensive demand rather than simple rate comparison.
⚖️ JPY - A 3% Japanese yield changes the conversation
USD/JPY is around 159.8, with the market once again sitting right on top of the 160 area.
But something important happened this morning.
Japan’s 10-year government yield reached 3% for the first time since 1996.
That is a huge symbolic shift for a country that spent decades defined by near-zero borrowing costs.
Markets now put the probability of another BOJ increase this month around the 70% area, and the United States is openly pushing Japan toward a firmer policy stance.
That should support JPY.
The problem is that U.S. yields are also rising and oil above $91 makes Japan’s import bill more painful.
So the cleaner read remains mixed.
The mistake here would be looking only at USD/JPY near 160 and concluding nothing has changed.
Japan’s entire yield environment is changing underneath that exchange rate.
⚖️ AUD - China helps, but global yields make the picture less comfortable
AUD is getting better news from China today.
The private manufacturing PMI at 51.5 shows improving factory demand and stronger exports, especially in the technology supply chain.
Australia also received hot inflation data last week, keeping the RBA tightening discussion alive.
Those are useful supports.
The problem is that Australia’s labour market weakened recently and global bond yields are rising aggressively.
Wednesday’s GDP report therefore matters.
Risks are balanced until we know whether Australian growth is resilient enough for the RBA to stay focused on inflation rather than employment.
🔺 NZD - Tomorrow’s RBNZ decision dominates everything
NZD has the clearest central-bank event among the commodity currencies this week.
The RBNZ is expected to lift rates to 2.75% tomorrow because inflation remains above its comfort zone.
That provides immediate policy support.
But I keep coming back to the same problem.
Unemployment is 5.6%.
That is a lot of labour-market slack for a central bank considering additional restriction.
Risks lean modestly toward NZD strength heading into the decision because the near-term policy direction remains firmer.
The bias weakens if the RBNZ makes clear that tomorrow’s move would leave policy sufficiently restrictive given the labour-market deterioration.
Cross-Asset Wrap:
- 🪙 Gold: Gold is trading around $4,425 to $4,435 per ounce, slipping modestly and holding near its lowest region in almost two weeks after Friday’s sharp Jackson Hole decline. A firmer dollar and rising real yields remain the main pressure points, while renewed Middle East tension provides some defensive support underneath. Watch today’s JOLTS and Friday’s payrolls because labour strength is what the Fed needs to validate the recent rise in rate expectations. [USD] [REAL YIELDS] [FED]
- 🥈 Silver: XAG/USD is trading around $66.40 to $66.50, broadly stable after its recent decline from the $70 area. Higher global yields are weighing on the monetary side, while improving Chinese, Japanese and euro-area manufacturing data provide a better signal for industrial demand. Watch U.S. ISM manufacturing for whether that improvement extends into the American factory cycle. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent is trading around $91 to $92 per barrel, extending the rebound triggered by renewed fighting involving Iran and fresh threats of further escalation. Supply uncertainty around the Gulf is rebuilding the geopolitical premium, while any improvement in physical shipping remains the main potential offset. Watch actual energy flows because today’s inflation concern depends much more on sustained supply disruption than one headline-driven move in crude. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: European equities are roughly flat this morning, with the STOXX 600 little changed, while Asian markets were softer and U.S. index futures are struggling for direction. The main pressure is coming from rising global borrowing costs, with corporate earnings providing some offset but not enough to remove the valuation problem. Watch whether the bond move keeps spreading globally because this is increasingly a financing-cost story rather than a simple Fed story. [YIELDS] [EARNINGS] [RISK]
- ₿ Crypto: Bitcoin is trading around $78,500 to $79,000, holding close to recent highs after gaining strongly through August. Higher real yields and stronger Fed tightening expectations are clear headwinds, while ongoing demand for alternative assets and continued liquidity interest are keeping the broader structure more resilient than gold. Watch whether U.S. labour data push Treasury yields even higher or begin reversing the post-Jackson Hole repricing. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about today is that the bond market has become bigger than the Fed.
The U.S. 10-year is around 4.78%.
Fine.
But Japan is at 3%.
German and French long yields are at levels we have not seen in around 15 years.
UK borrowing costs are extremely high.
Australian yields are rising.
This is not one central bank being repriced.
It is a global repricing of what money costs.
That distinction matters for currencies.
If Treasury yields rise while everyone else stays still, the dollar gets a cleaner relative advantage.
If Treasury yields rise because oil is climbing and then European, Japanese and Australian yields all follow them higher, the FX effect becomes much messier.
That is basically what we are seeing today.
The dollar is supported.
It is not running away.
EUR/USD is still around 1.16.
USD/JPY is still around 160 despite the huge U.S. yield.
And part of that is because the rest of the world is becoming more hawkish too.
Europe is probably the biggest change.
A few months ago, the euro story was mostly about whether the United States weakened.
Now euro-area manufacturing is above 52, Germany is improving and inflation is expected above 3%.
That is a completely different policy conversation.
I would not overcomplicate the China numbers either.
The official PMI was below 50.
The private PMI today is 51.5.
Both can be true.
Large export and technology manufacturers are doing better.
Domestic demand and services remain much weaker.
That explains why AUD gets some support from China without suddenly having a clean Chinese growth boom behind it.
JPY is the one I think traders should not misunderstand.
USD/JPY near 160 looks like nothing has worked.
Intervention happened.
The BOJ moved toward tighter policy.
The United States pushed Japan to do more.
And the yen is still weak.
But underneath that, Japan’s 10-year yield has just reached 3%.
That is not a normal Japanese market anymore.
Higher Japanese yields change domestic pension allocation, government financing, global capital flows and eventually the attractiveness of holding foreign bonds.
That does not mean the currency responds instantly.
It means the structure underneath the yen is changing.
Then we get to the United States.
Today’s JOLTS report is more important than it normally would be because Warsh has already made the Fed’s position clear.
Inflation above target means further restriction remains possible.
Fine.
Now the economy has to prove it can handle that.
If job openings remain healthy, the Fed has more room.
If openings keep falling, Friday’s payroll report becomes much more dangerous for the current September pricing.
That is why my actual view today is more nuanced than simply calling the dollar strong.
USD has policy support.
Oil is helping the inflation argument.
Treasury yields are extremely high.
But those same forces are pushing yields higher almost everywhere else.
EUR has better growth and ECB support.
JPY has an increasingly serious BOJ and domestic-yield story.
NZD has the RBNZ tomorrow.
CAD has the BoC.
AUD has GDP.
The mistake here would be thinking Jackson Hole ended the macro debate.
It started a new one.
The Fed told us inflation may require more work.
Now the global economy has to show how much more tightening it can actually absorb.
Want to turn this market context into a trading plan?
Check today’s Currency Strength Meter and Economic Calendar inside IntelliTrade Pro.
This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.
Need help decoding this article? Get our free Macro Decoder ebook when signing up to our newsletter using the sign up button below! No spam, just value.