Forex News
- US stock futures decline as markets are pricing in over a 92% chance of a rate hike following elevated energy costs.
- AI safety concerns and CEO calls for slower development spurred a sharp selloff in semiconductor stocks.
- Wall Street looks to extend losses after all major US stock benchmark indexes closed lower on Monday.
Dow Jones futures fall by 0.56% to trade near 52,150 during European hours on Tuesday. Meanwhile, S&P 500 futures decline by 0.42% to trade around 7,590, while Nasdaq 100 futures drop by 0.37% to trade near 29,050.
US stock futures move lower as markets increasingly anticipate an interest rate hike from the Federal Reserve this week. Escalating energy costs have heightened broader inflation fears, putting mounting pressure on central bankers to implement tighter monetary policy. Reflecting this shift in sentiment, the CME FedWatch tool indicates that money markets are now pricing in over a 92% probability of a rate increase, marking a sharp jump from around 59% just a week earlier.
Wall Street faced heavy downward pressure driven by a broad selloff in semiconductor equities, triggered by expanding safety and regulatory concerns surrounding rapid artificial intelligence development. Major indexes all closed in negative territory on Monday’s US regular session. The tech-heavy Nasdaq Composite dropped 0.56%, while the S&P 500 and the Dow Jones Industrial Average fell 0.48% and 0.29%, respectively.
Strategists at Danske Bank note that “equities closed lower yesterday after a pronounced roller coaster session,” with “several major indices recording intraday moves of around 1.5%.” They highlight that the session’s sharp swings underscored heightened volatility across the equity complex, as markets struggled to find a clear direction into the close.
The slide in tech shares came as major industry leaders publicly voiced caution regarding the velocity of artificial intelligence progress. Anthropic CEO Dario Amodei advocated for a more measured pace of development to manage the escalating risks associated with increasingly powerful models. This prudent stance gained significant backing across the sector, with OpenAI CEO Sam Altman and xAI CEO Elon Musk echoing similar concerns regarding AI safety.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Societe Generale’s Kunal Kundu expects the Reserve Bank of India (RBI) to respond to India’s broadening inflation pressures with a new mini rate-hike cycle. Kundu projects a 25bp hike in October, followed by two similar moves in December and February. While not its base case, Kundu also flags a non-negligible risk that the RBI could opt for a larger 50bp increase.
Rate hikes projected into early 2027
"The pickup in services inflation is particularly important from a monetary policy perspective."
"With headline inflation above the median target for a third consecutive month and underlying inflation beginning to firm, the room to look through food-led price pressures is narrowing."
"We continue to believe that the RBI will initiate a mini rate-hike cycle, announcing a 25bp hike at its October meeting, followed by two similar increases at its December and February meetings."
"Although this is not our baseline scenario, we also do not rule out a 50bp hike."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/JPY extends its recovery from lows below 153.00 last week to the 155.00 area.
- The US Dollar appreciates across the board as investors ramp up Fed tightening bets.
- US Dollar bulls are likely to meet important resistance around 155.20.
The Japanese Yen (JPY) is showing a moderately softer tone against the US Dollar (USD) this week, with all eyes on the monetary policy decisions bu¡y the US Federal Reserve (Fed) and the Bank of Japan (BoJ), due later this week. The USD/JPY pair has picked up to levels near 155.00 but remains capped below a previous resistance area, at 155.20, which is likely to pose a significant challenge for US Dollar bulls.
Markets are pricing a 92% chance that the Fed will h¡ike interest rates on Wednesday, according to the CME’s Fed Watch Tool. An impressive employment report in August and the hot inflation figures seen last week have boosted hopes that the central bank will tighten its monetary policy for the first time in three years this week, despite pressures to the contrary from US President Donald Trump.
In Japan, the BoJ is also expected to hike rates by 25 basis points on Friday and hint at a steeper tightening pace ahead. Analysts at DBS Group Research note that pressure from US Treasury Secretary Scott Bessent has "helped recast ‘Takaichinomics’ away from being Abenomics 2.0, from reflation towards deregulation, investment, and shareholder-friendly structural reform,” further underpinning the narrative of a more durable shift toward BoJ normalization.
In this context, DBS experts note that “even former BoJ-tightening sceptics – including Takuji Aida, an economic adviser to Takaichi and a former vocal opponent of BOJ tightening – are now acknowledging the case for higher rates, strengthening expectations for a hawkish hike on September 18.”
Technical Analysis: Price action remains below the H&S's neckline
USD/JPY trades at 154.87, maintaining a bearish near-term bias as it holds below the neckline of a bearish Head & Shoulders (H&S) pattern at 155.20. Momentum indicators on the daily chart have turned higher but remain within bearish territory, with the Relative Strength Index (RSI) at 37.70, while the Moving Average Convergence Divergence (MACD) is below zero, reinforcing the idea that rallies are still likely to face selling pressure.
The market is showing a mild correction from oversold levels that might lead to a confirmation of the H&S pattern with a failure at the mentioned 155.20. If that level is broken. The next targets are the September 4 high, near 156.75, and the 200-day Simple Moving Average (SMA), at 158.40.
A rejection at 155.20 on the contrary, brings the January and February lows, at the 152.20 area, back into focus. The H&S's measured target lies near the October 2025 low in the 146.60 area.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.18% | 0.37% | 0.01% | 0.24% | 0.30% | 0.02% | |
| EUR | -0.09% | 0.09% | 0.27% | -0.07% | 0.14% | 0.20% | -0.07% | |
| GBP | -0.18% | -0.09% | 0.19% | -0.18% | 0.05% | 0.09% | -0.16% | |
| JPY | -0.37% | -0.27% | -0.19% | -0.34% | -0.12% | -0.08% | -0.34% | |
| CAD | -0.01% | 0.07% | 0.18% | 0.34% | 0.22% | 0.27% | 0.00% | |
| AUD | -0.24% | -0.14% | -0.05% | 0.12% | -0.22% | 0.06% | -0.23% | |
| NZD | -0.30% | -0.20% | -0.09% | 0.08% | -0.27% | -0.06% | -0.26% | |
| CHF | -0.02% | 0.07% | 0.16% | 0.34% | -0.00% | 0.23% | 0.26% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
MUFG’s Lee Hardman notes the US Dollar (USD) has strengthened ahead of the FOMC meeting as Fed tightening expectations are repriced higher. The US Dollar Index (DXY) has recovered to levels seen before the August Treasury buyback announcement, with US yields rising sharply. MUFG highlights modest FX spillovers so far, but warns high beta and emerging market currencies face greater downside risks if bond yields and energy prices keep climbing.
Stronger Dollar tracks higher US yields
"The US dollar has continued to trade at modestly stronger levels overnight ahead of tomorrow’s FOMC meeting."
"The stronger US dollar has been encouraged by the hawkish repricing of Fed rate hike expectations."
"The US rate market now expects the Fed to deliver almost 100bps of hikes in the year ahead fully reversing last year’s rate cuts that totalled 75bps."
"Measures of volatility in both the equity and FX markets have started to pick up but are still at low levels. It highlights that spillovers from rising bond yields into the FX market have been modest so far."
“Similar price action has also been evident amongst emerging market currencies where heat commodity and high-yielding currencies have underperformed such as the Chilean peso, South African rand, Hungarian forint and Mexican peso. Downside risks for those currencies would intensify if rising bond yields and energy prices triggered a deeper correction lower for risk assets heading into year end.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/CAD falls as rising oil prices following Saudi pipeline disruptions strengthen the commodity-linked CAD.
- Hawkish comments from ECB officials hint at persistent inflation risks, signaling potential further rate hikes.
- Markets and major banks heavily expect a quarter-point ECB rate increase by year-end, capping Euro downside.
EUR/CAD extends its losses for the second successive day, trading around 1.6040 during European hours on Tuesday. The currency cross depreciates as the commodity-linked Canadian Dollar (CAD) gains support from rising crude oil prices.
Oil markets are strengthening as traders manage heightened uncertainty surrounding global supply, particularly with Saudi Arabia’s East-West pipeline remaining shut following drone attacks and no clear timeline for when operations will resume.
Canada inflation steady as RBC sees policy on hold
Economists at Royal Bank of Canada highlight that "Canadian inflation held at 3% year-over-year in August, unchanged from July," noting that the latest print underscores a steady headline pace even as underlying pressures continue to ease. Against this backdrop, RBC’s Abbey Xu points out that core measures remain close to the BoC’s 2% target, reinforcing the view that policy is likely to stay unchanged for an extended period, with any shift in the outlook hinging on how persistent recent strength in Oil prices proves to be.
However, downside pressure on the EUR/CAD cross may be limited by potential strength in the Euro (EUR). A series of European Central Bank (ECB) officials have warned of persistent upside inflation risks, driving expectations for further monetary tightening. This hawkish sentiment follows the ECB's recent decision to raise its key policy rates by 25 basis points as anticipated while signaling that additional rate hikes could be necessary.
Financial institutions are increasingly aligning with this outlook. Reports indicate that major banks, including Goldman Sachs, Citi, and Barclays, now expect another ECB rate increase in December. Financial markets are heavily backing this scenario, with LSEG data pricing in a 94% probability of a quarter-point hike in December, while Citi projects an additional rate increase extending into March 2027.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- US 10-year Treasury Yields hit a fresh 19-year high at 5.03% amid higher Oil prices, hawkish Fed bets.
- The Fed is almost certain to hike interest rates on Wednesday.
- Market experts see the Fed delivering more interest rate hikes in the near term.
United States (US) 10-year Treasury Yields have hit a fresh high of 5.03%, the level never seen in a little over 19 years. Higher yields on US bonds indicate rising interest obligations for the government, which generally leads to significant bond-buying operations by the administration. This scenario also diminishes the appeal of riskier assets.
Hot inflation expectations due to elevated oil prices, and fresh fears of a series of interest rate hikes by the Federal Reserve (Fed), are fuelling borrowing costs for the US government.
Oil prices have remained significantly higher in the past months since the onset of the Middle East war, which has de-anchored global inflation expectations. The WTI Oil trades close to $100 levels as concerns regarding prolonged energy supply disruption remain elevated.
Surging inflationary pressures worldwide have forced central banks to tighten their monetary conditions. This month, the European Central Bank (ECB) has already raised its policy rates by 25 basis points (bps).
The Federal Reserve (Fed) is also expected to break its five-meetings hold and hike interest rates by 25 bps to 3.75%-4.00% on Wednesday. Market experts have also started pricing in more rate hikes by the central bank.
Fed seen hiking as BNY flags limits to further tightening
Strategists at BNY expect the FOMC to “enact a 25bp rate hike this Wednesday, in line with implied market probabilities, which currently price over a 90% likelihood of such action.”
BNY adds that “while we expect a hike this week, and probably one more this year, we think the path to even higher policy rates is strewn with potential impediments to significantly tighter policy.” In their view, “the nearly 100bp of hikes (equivalent to four hikes of the standard 25bp increment) currently priced in will be realized,” but they caution that, although they are “not ready to see shorter-maturity yields fall any time soon,” these yields “may ultimately prove to be ahead of themselves.”
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Sep 16, 2026 18:00
Frequency: Irregular
Consensus: 4%
Previous: 3.75%
Source: Federal Reserve
ING’s Francesco Pesole says EUR/USD is trading close to its short-term fair value, while expectations for improving German ZEW data and the lingering impact of last week’s hawkish ECB hike offer some support to the Euro. However, he warns that a risk-off reaction to a hawkish Fed hike could quickly push EUR/USD towards ING’s 1.150 short-term target, given the pair’s high sensitivity to global equities and short-term rates.
Fed risk to Euro resilience
"This morning’s ZEW in Germany is expected to keep improving. Consensus is looking at a jump from 34 to 40 in the expectations gauge and from -61 to -52 in the current situation one. That’s effectively the only data release with any market-impact potential this week – unless final August CPI prints show large revisions."
"Anyway, the echo of last week’s hawkish ECB hike remains a more relevant driver for any euro resilience at this stage."
"Our models suggest EUR/USD is close to its short-term fair value model, slightly leaning towards undervaluation. That said, global equities and short-term rates have the highest betas on EUR/USD at the moment: a risk-off, hawkish hike by the Fed tomorrow could easily take the pair to our 1.150 short-term target."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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