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ING’s Francesco Pesole notes that a reported Bank of Japan rate check briefly pushed USD/JPY below 157.0 and suggests authorities may focus on the pace of moves rather than a specific level. However, with the Fed sounding more hawkish than the Bank of Japan, ING still sees room for further USD/JPY gains and considers a return to 160.0 consistent with current conditions despite elevated intervention risk.

BoJ vigilance but upside remains

"A reported Bank of Japan rate check on Friday pushed USD/JPY below 157.0. If confirmed, it may suggest that Japanese authorities are focused more on the pace of moves over a rolling x-day period than on defending a specific level."

"The hope is that this approach avoids creating a clear line in the sand for markets to target and helps keep positioning cautious. Nevertheless, the Fed has sounded distinctly more hawkish than the Bank of Japan this month, leaving room for further USD/JPY gains."

"Against that backdrop, a return to 160.0 still looks consistent with prevailing conditions, although intervention risk remains clearly elevated."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/JPY gains 0.36% on Monday and holds above 157.00.
• The Fed's hawkish tone supports the US Dollar despite higher interest rates in Japan.
• A rate check conducted on Friday revives speculation about intervention by Japanese authorities.

USD/JPY extends its advance on Monday and trades around 157.45 at the time of writing, up 0.36% on the day. The pair remains close to recent highs as the Japanese Yen (JPY) continues to weaken despite monetary tightening by the Bank of Japan (BoJ), while concerns about a potential intervention by Japanese authorities in the foreign exchange market resurface.

The Japanese Yen remains under pressure following the strong rebound in the US Dollar (USD) observed last week. The Federal Reserve (Fed) raised its benchmark interest rate for the first time in three years, while Fed Chair Kevin Warsh delivered a more hawkish message than expected, prompting investors to increase bets on further rate hikes.

According to the CME FedWatch tool, markets now see a 53% chance of another 25-basis-point rate hike in October, up from 43% a week earlier. The chances of at least one additional hike by the end of the year have risen to 90% from 80%. These expectations keep US Treasury yields elevated and provide support to the US Dollar.

At the same time, the Bank of Japan raised its policy rate by 25 basis points to 1.25% on Friday, its highest level in 31 years. BoJ Governor Kazuo Ueda left the door open to further increases if economic activity and prices evolve in line with the central bank's projections. However, two members of the policy board called for greater patience before proceeding with additional tightening. These divisions are raising questions about how quickly the BoJ can continue normalizing monetary policy and are limiting support for the JPY for now.

The persistent weakness of the Japanese currency is also attracting the attention of authorities. The BoJ conducted a rate check with market participants on Friday, a move closely watched by investors because of its association with the risk of intervention in the foreign exchange market. A further rise in USD/JPY could therefore keep speculation about action by Japanese authorities alive.

The US Dollar Index (DXY), which measures the performance of the Dollar against a basket of six major currencies, trades around 100.35, not far from the seven-week high of 100.56 reached on Friday. A modest pullback in US Treasury yields is limiting the Greenback's advance, however, with the benchmark 10-year yield trading around 4.97% after reaching 5.04% last week, its highest level since 2007.

US Treasury yields nevertheless remain elevated as the war in the Middle East keeps inflation concerns alive and a geopolitical risk premium remains embedded in energy prices. US President Donald Trump said he would probably be open to meeting Iranian President Masoud Pezeshkian on the sidelines of the United Nations (UN) General Assembly this week.

Investors are also watching the summit between US President Donald Trump and Chinese President Xi Jinping, scheduled for later this week. Geopolitical developments, shifts in US interest-rate expectations and any fresh indications of a potential Japanese intervention are likely to remain the main drivers of USD/JPY in the near term.

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 157.40, keeping a constructive bullish bias as it holds above the 100-period simple moving average (SMA) around 156.16 and the 200-period SMA near 155.10. The pair is consolidating just under the horizontal resistance at 158.00, while the Relative Strength Index (RSI) near 61 suggests positive but not extreme upside momentum, hinting that dips may still find buyers as long as price remains supported by these underlying averages.

On the downside, initial support emerges at the 156.50 horizontal level, followed by the 100-period SMA at 156.16, with a deeper cushion at 155.50 and the 200-period SMA around 155.10. On the topside, a clear break above 158.00 would open the door to further gains, reinforcing the current bullish tone as long as the pair stays comfortably above the clustered supports below.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• EUR/USD struggles to attract buyers as traders favour the higher-yielding US Dollar.
• The war in the Middle East keeps inflation risks and Treasury yields elevated.
• Political uncertainty in Germany and fiscal concerns in France add to the Euro’s weakness.

EUR/USD trades with a downside bias on Monday as the US Dollar holds near recent highs, supported by expectations of additional Federal Reserve (Fed) interest rate hikes. Developments in the Middle East also remain in focus. At the time of writing, EUR/USD trades around 1.1473, hovering near levels last seen in late July.

The US Dollar Index, which tracks the Greenback against a basket of six major currencies, trades around 100.36, close to the seven-week high of 100.56 touched on Friday.

However, a modest pullback in US Treasury yields amid falling Oil prices limits the Greenback’s advance. The benchmark 10-year US Treasury yield trades around 4.97%, below the 5.04% level touched last week, its highest since 2007.

Despite the pullback, US Treasury yields stay elevated as the war in the Middle East keeps inflation concerns alive, while a geopolitical risk premium remains embedded in energy prices.

US President Donald Trump said he would probably be open to meeting Iranian President Masoud Pezeshkian on the sidelines of the United Nations General Assembly this week. Markets also await the Trump-Xi summit, scheduled for September 23–25.

On the monetary policy front, both the Fed and the European Central Bank (ECB) raised interest rates by 25 basis points last week and kept the door open to additional tightening to bring inflation back towards their respective 2% targets.

Against this backdrop, the Euro stays vulnerable as traders favour the higher-yielding US Dollar. The Eurozone’s dependence on imported energy also increases the risk of stagflation, as higher energy costs could keep inflation elevated while weakening economic growth.

Political uncertainty in Germany and fiscal concerns in France add pressure on the shared currency. Chancellor Friedrich Merz’s Christian Democratic Union suffered heavy losses in Germany’s state elections, while the far-right Alternative for Germany won in Mecklenburg-Western Pomerania and the far-left Left Party finished first in Berlin.

Societe Generale strategists Michael Haigh and Jeremy Sellem argue that global Oil product markets have shifted from tight to critical. They link East-West pipeline disruptions, Russian outages, elevated freight and low inventories to structurally constrained supply. They highlight exceptionally high refining margins, stressed crude and product balances, and warns that current conditions leave little buffer against further shocks.

Global product balances under strain

"This week’s CCA examines the growing evidence of tightening global oil product markets. We assess the implications of the recent East-West pipeline disruption, worsening Russian refinery outages, and the increasing disconnect between crude oil and diesel markets as exceptional product tightness drives product prices higher. We also explore the sharp rise in freight rates, now up by an order of magnitude of tenfold in some key routes, and how these costs are increasingly feeding through to end-user prices."

"Finally, through a series of charts, we present the anatomy of product market tightness, showing declining inventories, weaker exports, lower refinery supply, and rising refinery outages, all pointing to an increasingly constrained global market. Refining margins are extremely high reflecting the need for products."

"Taken together, the charts suggest that product markets remain structurally tight. The persistence of margins well above historical averages across the US, Europe, and Asia indicates that the global refining system is struggling to replace lost supply, rebuild inventories, and meet demand simultaneously. This conclusion is consistent with the broader evidence of declining product exports, elevated refinery outages, low inventories, and ongoing disruptions to crude and product flows."

"The fact that product markets remain exceptionally tight despite weaker demand in two key consuming regions highlights the extent to which supply disruptions, refinery outages, and constrained exports are driving current market conditions."

"Taken together, the attacks underscore a notable escalation in the conflict and highlight the vulnerability of regional energy infrastructure. As a result, the likelihood of a severe supply shock has increased. Under a scenario where military tensions continue to intensify and disruptions become prolonged; Brent prices could rise well beyond current levels and potentially exceed $150/bbl."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

National Bank of Canada (NBC) strategist Angelo Katsoras analyzes how the 2026 United States (US) midterm elections could reshape policy under President Trump. He notes Democrats are favoured by high inflation, weak approval ratings and a strong generic ballot lead. The report outlines scenarios where Democrats take the House alone or both chambers, highlighting implications for legislation, investigations and executive action.

Midterms reshape Washington policy landscape

"The current political environment favours the Democrats. High inflation, rising gasoline and food prices, an unpopular war with Iran, the President’s low approval ratings and the Democrats' roughly seven-to eight-point lead in the generic congressional ballot all point to Democratic gains in the midterms."

"This report examines what the two most likely outcomes—Republicans losing control of one or both chambers—would mean for the President’s legislative agenda, including trade policy."

"Democratic control of both chambers would represent a major political setback for the Trump administration."

"Losing control of both chambers of Congress could weaken President Trump’s position within the Republican Party, particularly if Republicans blame him for their electoral losses."

"Finally, looking beyond the midterms, policy uncertainty is set to rise as attention turns to the priorities of the next presidential administration."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/GBP trades around 0.8575 on Monday, virtually unchanged on the day after Friday’s decline.
• Political uncertainty in Germany limits demand for the Euro, while lower Oil prices provide some support.
• Investors turn their attention to Eurozone and UK business activity data due later this week.

EUR/GBP trades around 0.8575 on Monday at the time of writing, virtually unchanged on the day. The Euro (EUR) struggles to regain bullish momentum against the British Pound (GBP), as political concerns in Germany partly offset support from falling Oil prices.

German political uncertainty returns to the spotlight after Chancellor Friedrich Merz’s party suffered a setback in regional elections over the weekend. Merz described the result as a “disaster” while reiterating his intention to remain in office and pursue the economic reforms already underway. The political backdrop keeps investors cautious toward the Euro at the start of the week.

Lower Oil prices, however, provide a positive counterweight for the common currency. Brent crude falls below the $100 level and trades more than 8% below last week’s highs. Lower energy costs are generally supportive for Eurozone economies, which rely heavily on energy imports, as they ease cost pressures on businesses and consumers.

Investors are also assessing the monetary policy outlook for the European Central Bank (ECB) and the Bank of England (BoE), two key drivers of the interest-rate differential between the Euro and the British Pound.

ECB President Christine Lagarde stressed that upcoming interest-rate decisions will depend on economic data and will be taken on a meeting-by-meeting basis. In the United Kingdom (UK), BoE Governor Andrew Bailey suggested that further monetary tightening could still be necessary, helping the British Pound retain some support.

Rabobank sees December ECB hike as likely but largely temporary

Strategists at Rabobank say their “new energy price forecasts make another rate hike more likely than not,” and now expect the ECB “to raise the deposit facility rate by 25bp in December, to 2.75%.” They stress that “this is not a shift to a stronger policy response,” but rather a calibrated reaction to an “additional energy shock” that, in their view, “hits inflation harder and earlier than economic activity.” Against that backdrop, they argue that “some further tightening may be required to keep expectations anchored, and to prevent second round effects,” leading them to “pencil in an additional rate hike in December.”

However, Rabobank emphasises that this is not the start of a sustained tightening cycle. “Considering that energy prices should start to abate in March, we believe policymakers won’t need to keep up that appearance for much longer. Thus, we forecast just one additional hike,” they write. While they acknowledge that “the longer high energy prices persist, the greater the risks that such second-round effects could take hold,” they note that “that’s precisely what the previous two hikes and a December follow-up seek to mitigate.” As long as “data and surveys do not indicate that second-round effects may materialise, the ECB need not respond more forcefully,” they add.

In terms of the medium-term policy path, Rabobank argues that “any deposit facility rate increases above the current 2.50%” should be seen as “temporary,” and that “the ECB will probably revert these in the second half of 2027.” They also highlight that this is “another reason why we haven’t factored in a March hike yet: monetary policy famously works with long and variable lags, so the ECB will probably be looking beyond the tail-end of the energy-driven inflation spike by then.”

Market attention now turns to this week’s macroeconomic calendar. Christine Lagarde is due to speak in Frankfurt later on Monday, while preliminary September Purchasing Managers Index (PMI) data for the Eurozone and the UK, scheduled for Wednesday, could provide fresh clues about economic momentum in both regions and offer EUR/GBP a clearer directional catalyst.

Standard Chartered economists Anubhuti Sahay and Saurav Anand highlight that India’s AI-enabling goods trade deficit has become the second-largest contributor to the country’s trade gap after Oil, overtaking Gold. They argue the deterioration is mainly price-driven and expect the AI-linked deficit to rise further, adding pressure on the current account and INR, partly offset by recent NRI deposit-led capital inflows.

AI imports strain India’s external accounts

"The AI-enabling goods trade deficit is now the second-largest contributor to India’s trade deficit after oil, having surpassed the gold deficit."

"The 12-month rolling trade deficit in AI-enabling products – advanced semiconductors, processors, memory chips, data-processing units (DPUs) and networking hardware – rose to 2.0% of GDP (USD 77bn) in July 2026 from 1.5% a year earlier."

"The recent deterioration in India’s AI-enabling goods trade deficit appears increasingly price-led rather than volume-led, in our view."

"If the current trend is sustained, we expect India’s AI-enabling goods trade deficit to widen further to c.2.3% of GDP by end-March 2027, adding pressure on the C/A deficit and the INR."

"The recent surge in capital inflows, supported by policy incentives to attract non-resident deposits, is likely to anchor India’s external balance and the INR in the near term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

TD Securities’ commodity strategists report that CTAs (Commodity Trading Advisors) have reversed recent Gold buying, yet emphasize that discretionary investors continue to support the metal. They point out Gold’s resilience after a hawkish FOMC hike and a broadly favorable precious metals backdrop. The team expects any near-term weakness to be limited and to present renewed buying opportunities for Gold.

CTA selling seen as opportunity

"For precious metals, CTAs have unwound recent buying in gold, but the market remains well-supported by underlying discretionary investment appetite."

"We highlighted on Friday that CTA buying in gold could be quickly reversed, but note that the yellow metal is still holding extremely strong after the FOMC delivered a hawkish hike."

"Despite a hiking cycle being priced in, the broader precious metals landscape remains extremely favorable, while an easing of energy prices has also offered support in the immediate term."

"With that said, we anticipate any near-term weakness in the precious metals market would be contained to only modest CTA selling, and would increasingly be seen as a buying opportunity for the yellow metal."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/CAD holds near 1.4000 as widening US-Canada rate differentials weigh on the Canadian Dollar.
• Falling Oil prices add pressure on the Loonie, while lower US Treasury yields cap the pair’s upside.
• BoC Governor Tiff Macklem’s speech takes centre stage for fresh clues about the policy outlook.

USD/CAD holds firm near the 1.4000 psychological mark on Monday as the Federal Reserve’s (Fed) hawkish outlook and widening US-Canada interest-rate differentials keep the Canadian Dollar (CAD) on the back foot. However, the pair lacks strong follow-through buying as a pullback in US Treasury yields leaves the US Dollar (USD) struggling to extend its recent gains.

US Treasury yields fall across the curve as Oil prices extend their decline. Energy prices are under pressure amid signs of diplomatic efforts surrounding the war in the Middle East and improving Saudi crude flows. US President Donald Trump said he would probably be open to meeting Iranian President Masoud Pezeshkian on the sidelines of the United Nations General Assembly this week, where he could also meet leaders from Persian Gulf countries.

The benchmark 10-year US Treasury yield trades around 4.95%, below the 5.04% level touched last week, its highest since 2007. The US Dollar Index, which tracks the Greenback's value against a basket of six major currencies, trades around 100.25, below Friday’s seven-week high of 100.56.

Falling Oil prices are another source of pressure on the commodity-linked Loonie, given Canada’s status as a major crude exporter. West Texas Intermediate (WTI) Oil trades around $93.50, falling for a fourth consecutive day and touching its lowest level in more than a week.

However, the widening gap between short-term US and Canadian yields remains the main reason behind the CAD’s recent underperformance. The currency has lost around 1% against the US Dollar so far this month.

At their respective September monetary policy meetings, the Fed raised interest rates by 25 basis points (bps) to 3.75%-4.00%, while the Bank of Canada (BoC) kept its policy rate unchanged at 2.25% for a seventh consecutive meeting. The updated dot plot showed that 16 of 18 policymakers expect at least one more rate increase this year, keeping the prospect of additional tightening firmly on the table.

Chicago Fed President Austan Goolsbee said on Monday that he is “optimistic that the Fed could get back on a path to 2% as long as there is no more evidence of demand overheating,” adding that he would have no problem with interest rates moving lower if there is “convincing evidence inflation is heading back to 2%.”

BoC focus shifts to inflation pass-through as Macklem speech looms

Analysts at Royal Bank of Canada note that BoC Governor Tiff Macklem is scheduled to speak on “economic developments” on Monday in Halifax, an event that “could provide some additional guidance ahead of its interest rate decision on Oct. 28.” They recall that at its last meeting, the BoC “flagged concerns about broader inflation implications from higher energy prices,” but emphasize that the meeting minutes “clarified that policymakers are more focused on pass-through to general inflation than on elevated oil prices themselves, which the central bank cannot influence.” Against this backdrop, RBC maintains its existing policy outlook but cautions that “risks to this forecast are tilting toward earlier hikes.”