Bonds. Nervous bonds.

Evidence tier: A1 Evidence type: Auto-discovered official publication Source: Convera Company News Official publication date: 2026-09-04 Captured: 2026-09-05T01:34:41.887Z

• Fed hike more likely after Warsh’s Jackson Hole speech. Federal Reserve Chair Kevin Warsh reinforced the Fed’s inflation-fighting commitment at Jackson Hole, prompting markets to price in a greater chance of further rate hikes. Bond yields recorded their biggest post-Jackson Hole jump in two decades, boosting the US dollar.
• Bond sell-off weighs on markets. Global bond yields surged as investors worried about persistent inflation, higher government spending and potential additional Fed tightening. Rising yields pressured equities, lifted the US dollar and encouraged a more cautious tone across financial markets.
• Oil rally reignites inflation fears. Renewed US-Iran tensions pushed Brent crude towards US$95 a barrel, adding to concerns that inflation could remain elevated. The sharp rise in energy prices complicated the outlook for central banks already weighing higher interest rates.
• USD/JPY volatility dents greenback. A sharp fall in USD/JPY sparked broad US dollar weakness late in the week. While intervention speculation resurfaced, traders largely attributed the move to positioning and heightened market nerves rather than official action.
• Jobs report becomes key market test. Markets ended the week awaiting the US non-farm payrolls report, a critical input for the Fed’s September decision. Mixed labour market signals left investors searching for clarity on growth, employment trends and interest rate expectations.

Global Macro US growth holds, hiring shows mixed signals

Blowout NFP. US payrolls rose by 162,000 in August, beating the 55,000 forecast, while prior months were revised up by 55,000. Unemployment held at 4.1% and wage growth remained firm. The report raised the chance of a September Fed hike above 60%, with next week’s CPI now decisive.

US Manufacturing. ISM manufacturing eased to 54.6 vs 55.4 expected, but remained in expansion for an eighth month. Prices paid held at an elevated 71.1, while new orders and employment lost momentum.

US Services. ISM services rose to 55.4 vs 54.2 expected, with business activity at 61.7 and new orders surging to 60.9. Prices paid climbed to 72.6, while employment remained in contraction at 47.8, reinforcing the divide between strong demand and cautious hiring.

Mixed labor signals. ADP payrolls rose only 38k vs 47k expected, the weakest increase since January, with manufacturing shedding 17k jobs. JOLTS openings also missed at 7.27mn, while the hiring and quits rates remained subdued.

Central Banks Diverge. The BoC held at 2.25%, balancing a broadening recovery against higher inflation risks from energy and tariffs. The RBNZ raised rates by 25bp to 2.75%, but its cautious guidance suggested only gradual tightening from here.

Global Inflation. Euro-area inflation rose to 3.3% from 2.9%, driven by a 14.3% rise in energy prices, although core inflation eased to 2.4% and services to 3.0%. Japan offered a firmer activity signal, with July retail sales up 4.0% y/y and industrial production rising 0.1% m/m, both above expectations.

Week ahead Markets price ECB hike with near-certainty

Another ECB hike incoming? The ECB meets next week, with markets pricing a 25bp rate hike with near certainty. August inflation data surprised to the upside, reinforcing the case for what would be the Bank’s second hike this year. Beyond September, however, the outlook is less clear. ECB officials continue to downplay the broader inflation impact of higher energy prices, and another hike would push rates deeper into restrictive territory, raising risks to growth.

All eyes on US inflation. Another key release next week is the August US inflation report. The data could prove decisive in determining whether the Fed delivers a rate hike in two weeks’ time. Despite continued evidence that the labour market remains solid, the Fed’s reaction function remains squarely focused on inflation.

Germany’s industrial pulse. Germany’s industrial production report for July will provide a fresh gauge of the sector’s momentum. Despite higher energy prices linked to Middle East tensions and disruptions to Rhine river transport, German industry has staged a notable rebound in recent months.

FX views Dollar finds a hawkish lifeline

USD Greenback clings to Fed hope. The US dollar fought for support this week from a hawkish Fed narrative, despite several factors working against it. Lingering credibility concerns tied to the broader debasement trade, upbeat risk sentiment eroding the dollar’s safe-haven appeal, and a stronger yen all weighed on the greenback. That said, a blowout jobs report late in the week revived bets on a Fed hike in two weeks’ time, helping the dollar regain some ground. Even so, the FOMC has made it clear that it views the labour market as solid, while inflation remains the key wildcard. Some officials have pointed to a more benign underlying inflation backdrop outside of energy, suggesting a downside surprise in next week’s August inflation could still tilt the balance in favour of a pause. For the hawkish Fed narrative to provide more durable support for the dollar, a rate hike this month may be required. That is especially true after Fed Chair Warsh set a notably high hawkish bar with his Jackson Hole keynote, while markets remain wary of the Fed’s inflation-fighting credentials.

EUR ECB priced for perfection. EUR/USD gave back some of its weekly gains following a blowout US jobs report at the end of the week. The pair is unlikely to move much lower before next week’s US inflation numbers. Support in the 1.1570/60 zone should hold in the meantime. Unfortunately, the euro side of the equation has little to offer. ECB hiking expectations still look stretched, with markets pricing three hikes by June 2027. Any unwinding of those expectations is likely to keep the euro under pressure. An ECB hike next week looks like a done deal, but beyond that the policy backdrop would be increasingly restrictive. We doubt the ECB will be willing to sacrifice growth to contain an inflation backdrop that still shows little evidence of price pressures spilling over beyond energy-related sectors.

GBP Pill presses for action. Bank of England Chief Economist Huw Pill argued that raising Bank Rate from 3.75% to 4.00% would reduce the risk of policy falling behind inflation pressures. He said a softer labour market should help limit secondary price effects but may not eliminate them entirely. Pill believes moving earlier would reinforce the central bank’s inflation-fighting credentials and help prevent temporary price shocks from becoming more persistent without signalling an extended tightening cycle. Pill and two policymakers voted for a 25bp increase in July but were outvoted by six members who favoured no change. Markets currently assign a low probability to a September move, with expectations still tilted towards November. Initial support for GBP/USD is located at the 50-day EMA of 1.3483, followed by the 100-day EMA at 1.3453. On the upside, the next key resistance level is 1.3600.

CHF Franc finds support. USD/CHF is trading near 0.808, down about 65 pips this week, as the franc benefits from broad dollar weakness, safe-haven demand and a sharp domestic inflation surprise. Swiss inflation doubled to 0.8% y/y in August from 0.4%, its highest since 2024, complicating the SNB’s policy outlook even though much of the increase came from energy and rents. The franc has strengthened despite a roughly 417bp US yield advantage, showing that geopolitical risk and defensive flows are outweighing the carry disadvantage for now. Technically, USD/CHF remains anchored around 0.808, with immediate support at 0.8062 followed by 0.8000, while resistance sits at 0.8131 and then 0.8200. The SNB’s willingness to intervene should limit aggressive franc appreciation, but the inflation surprise leaves less room for a relaxed message at its September 18 meeting. Until then, Hormuz developments and US inflation data will determine whether USD/CHF holds this range or tests the 0.8000 threshold.

CAD Loonie reverses gains. USD/CAD trades near 1.3860 to end the week, after Friday’s jobs data erased most of the Loonie’s Bank of Canada-driven rally. Canada lost 41,700 jobs in August against a 15,000 gain expected, with full-time employment down 35,900 and wage growth slowing to 2.0% year over year. The unemployment rate held at 6.4% only as participation slipped to 65.0%, challenging expectations for an early BoC hike despite Macklem’s warning over rising inflation risks. Strong US payrolls deepened the divergence, widening the US-Canada two-year yield spread back toward 130bp. Trade tensions remain another risk, with Canada’s counter-tariffs due to take effect on September 8. Technically, USD/CAD has returned to the middle of its 1.3780–1.3940 weekly range; a break above 1.3940 would expose 1.4000, while softer US CPI next week could send the pair back toward 1.3780.

AUD Australian confidence stays firm. Australia’s services sector expanded for a third consecutive month in August, although growth eased slightly, with the services index edging down to 53.2 from 53.6. The composite reading also softened to 52.7 as manufacturing activity slowed. Steady domestic demand helped generate new business, lifting business confidence to a six-month high despite weaker overseas demand. Transport and storage recorded the strongest gains, while technology and communications activity weakened. Firms continued to contend with higher fuel and labour costs but passed through smaller price increases than in July. Initial support for AUD/USD is located at the 21-day EMA of 0.7134, followed by the 50-day EMA at 0.7084. On the upside, the next key resistance level is 0.7250.

CNH China demand shows improvement. China’s official manufacturing index rose to 49.8 in August from 49.2 in July, beating expectations and signalling a more stable operating environment. While activity remained below the 50-point threshold, both new orders and export orders returned to growth, indicating firmer demand. Smaller firms, hiring activity, inventories and older production sectors continued to lag. Meanwhile, the non-manufacturing index held steady at 49.0, missing forecasts and highlighting ongoing softness in domestic demand. The composite reading edged up to 49.5 from 49.3, suggesting overall activity is gradually finding firmer footing. USD/CNH remains near a three-year low. A break above the 21-day EMA at 6.7303 could lift the pair towards the 50-day EMA at 6.7505. On the downside, support is located at 6.7050.

JPY Yen extends recent gains. Japan’s inflation-adjusted household spending fell 3.6% y/y in July, marking an eighth straight month of decline and undershooting expectations. On a seasonally adjusted basis, spending rose 0.5%, recovering from June’s fall but falling short of forecasts. Elevated living costs continued to curb discretionary spending, highlighting persistent softness in consumer demand. The data adds to the factors policymakers must consider when assessing the outlook for monetary policy. Expectations for further BOJ tightening, alongside lingering speculation over potential official support for the currency, have continued to underpin JPY strength. The JPY was the strongest performer among G10 currencies during the week of 31 August, gaining around 2% vs USD. USD/JPY has fallen to a one-month low and remains nearly 5% below its 23 July peak of 163.99. The 21-day EMA of 158.95, followed by 100-day EMA at 159.53 and the 50-day EMA at 159.69 are the key near-term resistance levels to watch.

MXN Peso stays resilient. The Mexican peso heads into Friday as the best performer among 14 major currencies, gaining 0.69% and pushing USD/MXN to a fresh cycle low near 16.89. Banxico’s 6.50% policy rate and a roughly 344bp two-year yield premium over the US continue to attract demand, while reserves near $258.6bn reinforce Mexico’s external position. A more cautious tone from Fed officials has also reduced expectations for a September hike, although that relief remains vulnerable to incoming US data. Technically, USD/MXN is holding just above its 52-week low near 16.92, with 16.90 and 16.80 the next downside levels; a recovery above 17.00 would instead expose 17.10–17.20. Next week’s US CPI next week will shape rate expectations ahead of the Fed’s September 16 meeting. Next week, domestic attention turns to Mexico’s August inflation report, with the annual rate expected to remain near 3.3%. Developments in the Middle East also remain a key risk, as renewed escalation could weaken risk appetite and disrupt the carry trade that has driven the peso roughly 6% higher this year.

COP Peso rebounds. USD/COP closes the week trading near 3,140, down roughly 83 pesos this week, as the Colombian peso recovered from Monday’s fiscal shock and benefited from renewed demand for EM carry. Colombia’s 12% policy rate and nearly 788bp 10-year yield premium over the US remain powerful supports, although plans for about $11bn in additional government borrowing have sharpened concerns over debt and fiscal discipline. The policy mix remains difficult, with tight monetary conditions working against an expansionary fiscal stance, while elevated oil prices offer some relief through export revenues. Technically, 3,130 is the immediate support level, followed by 3,058–3,090, while 3,160–3,200 marks the main resistance zone. One-month implied volatility near 14.5% signals far greater two-way risk than in other regional currencies. Next week markets will also pay attention domestically to local inflation for the month of August, where the YoY reading is expected to stay close to 6.1%., while further details on Colombia’s borrowing plan could determine whether the peso extends its recovery or gives back recent gains.

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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.