TMGM Daily Market Breakfast: 4 September 2026

Morning Snapshot

• Federal Reserve Governor Christopher Waller said he would be inclined to support holding rates steady at the September meeting if August inflation shows further progress, but would consider a hike if inflation comes in hot.
• U.S. markets headed into the August payrolls release with the Dollar Index near 99.00 after falling below 99.00 on Thursday, while investors focused on a labour-market report expected around 12:30 GMT.
• Bank of England Governor Andrew Bailey said policymakers have some discretion over how quickly inflation returns to target, while warning that bond-market pressures remain a risk, as Chief Economist Huw Pill reiterated support for raising Bank Rate to 4.00%.
• The Bank of Canada kept its policy rate unchanged at 2.25% for a seventh straight meeting but adopted a more hawkish tone as officials highlighted inflation risks from higher energy prices and renewed trade tensions with the United States.
• The Japanese Yen strengthened sharply, with USD/JPY around 155.40 and down 2.07% on Thursday, after Bank of Japan officials signaled a more flexible approach to rate increases and Tokyo reiterated its readiness to intervene in currency markets.
• WTI crude traded around $89.50 to $89.65 and struggled to sustain a move above $90 as U.S.-Iran tensions and tanker escorts through the Strait of Hormuz kept supply risks in focus.
• European gas prices rose above EUR70/MWh, the highest since March, as lower Persian Gulf LNG supply and strong Asian spot buying left EU storage around 65% full at the end of August versus an 82% five-year average.
• Banxico Deputy Governor Jonathan Heath said Mexico’s central bank can wait before cutting rates, describing the current policy stance as appropriate and pointing to persistent core inflation.
• Australian rate expectations firmed after stronger domestic data, with AUD/USD near 0.7210, while markets also weighed the Fed’s data-dependent stance ahead of U.S. jobs data.
• Dow Jones futures were little changed in European trading, while S&P 500 and Nasdaq 100 futures edged higher after a strong Thursday session in U.S. equities.

Market Developments

U.S. Equities

The Dow Jones Industrial Average traded near 53,750 on Thursday, up 1.3% and on track for its strongest session since early August after Waller’s comments eased some near-term tightening concerns. In early Friday futures trade, Dow futures were down 0.06% near 53,710, while S&P 500 futures rose 0.06% to around 7,760 and Nasdaq 100 futures gained 0.38% to about 29,640.

Foreign Exchange

The U.S. Dollar Index fell below 99.00 to around 98.90 on Thursday, down 0.67% on the day after reaching 99.86 on Wednesday, before edging back toward 99.00 on Friday ahead of payrolls. USD/JPY traded around 155.40 on Thursday, down 2.07% on the day, while GBP/USD traded near 1.3530 to 1.3550 before easing back toward 1.3520 and AUD/USD held around 0.7210.

Commodities

WTI crude traded around $89.50 in Asian hours and near $88.65 in European trading while struggling to move above $90 as Strait of Hormuz risks remained in focus. Gold rallied more than 2% on Thursday and rebounded above $4,450, trading around $4,470 in early Friday trade as Fed rate-hike expectations eased.

Macroeconomics & Central Banks

Waller Keeps September Fed Decision Tied to Inflation and Jobs Data

Federal Reserve Governor Christopher Waller said he is inclined to support leaving the policy rate unchanged at the September meeting if August inflation data shows continued progress, but added that he would consider a rate increase if inflation comes in hot. His remarks reinforced the Fed’s data-dependent stance ahead of two key releases: August consumer prices and the August employment report.

The comments shifted market pricing for a September move closer to an even split after previously leaning more toward another increase. The U.S. Dollar weakened after the remarks, while Treasury yields initially fell before the 10-year yield later finished the session unchanged. U.S. equities also strengthened, with the Dow Jones Industrial Average up 1.3% on Thursday.

The policy debate is unfolding against a mixed U.S. data backdrop. ISM services rose to 55.4 in August from 54.1 and above the 54.2 consensus, with business activity, new orders and prices increasing notably, while the employment component improved only slightly and remained in contraction territory.

Markets Await U.S. August Payrolls After Dollar Slide

Attention turned to the U.S. August Nonfarm Payrolls report due at 12:30 GMT on Friday, with markets treating it as the week’s most important scheduled data release. Consensus estimates cited in the reporting pointed to payroll growth between 58,000 and 65,000, an unemployment rate of 4.1% and average hourly earnings growth of 0.3% month on month.

The release follows a weak July payrolls reading and arrives as the Fed weighs whether inflation and labour-market conditions justify holding rates steady or tightening again. Ahead of the data, the U.S. Dollar Index hovered near 99.00 on Friday after dropping below that level to around 98.90 on Thursday, its lowest in more than a week.

U.S. equity futures were subdued before the report. Dow futures slipped 0.06% to about 53,710 in European trading, while S&P 500 futures rose 0.06% to around 7,760 and Nasdaq 100 futures gained 0.38% to roughly 29,640.

Bank of England Officials Keep Tightening Bias in View

Bank of England Governor Andrew Bailey said policymakers have some discretion over how quickly inflation is brought back to target, while stressing that returning inflation to target remains imperative. He also warned of bond-market pressures, underscoring the sensitivity of policy decisions to broader financial conditions.

Separately, Chief Economist Huw Pill reiterated his support for raising Bank Rate to 4.00%, arguing that policymakers cannot wait for uncertainty around the Middle East conflict and energy prices to clear before acting. Those remarks helped support sterling during the reporting window, although the pound later pulled back from session highs just below 1.3550 against the dollar to trade nearer 1.3520.

The BoE messaging kept a hawkish tone in place even as Bailey emphasized flexibility in the pace of disinflation. Sterling also found support against the euro, ending a four-day EUR/GBP rally as markets digested the latest BoE signals.

Bank of Canada Holds at 2.25% but Adopts More Hawkish Tone

The Bank of Canada left its policy rate unchanged at 2.25% for a seventh consecutive meeting, but the tone of its communication turned more hawkish. Governor Tiff Macklem said inflation remained too high and that upside risks had increased because of the Middle East conflict and renewed escalation in trade tensions with the United States.

Officials highlighted the risk that higher energy prices could spill over into a broader range of goods and services. The shift in tone helped support the Canadian dollar during the reporting window, with USD/CAD extending its decline for a second straight day alongside broader U.S. dollar weakness.

Canada’s labour-market data was also in focus. August employment figures were due later Friday, with a Bloomberg consensus for a gain of 15,000 jobs after nearly 75,000 jobs were added in the previous month. Recent Canadian labour data has been volatile, adding to the significance of the release for rate expectations.

Japanese Yen Jumps as BoJ Signals and Intervention Risk Converge

The Japanese yen strengthened sharply during the reporting window, with USD/JPY trading around 155.40 on Thursday, down 2.07% on the day, as investors responded to a more hawkish Bank of Japan tone and persistent intervention risk.

BoJ board member Hajime Takata said the central bank should adopt a more flexible approach to future rate increases and move beyond its traditional pattern of raising rates every six months. He said policymakers should consider a broader range of options rather than systematically limiting themselves to 25-basis-point moves. Reporting also indicated that markets were fully pricing in an interest-rate increase at the BoJ’s September 16-17 meeting.

Japan’s top currency diplomat Atsushi Mimura reiterated that authorities remain ready to intervene and said he was neither at ease nor satisfied with current foreign-exchange conditions. Separate reporting highlighted that markets have become increasingly reluctant to test the 160 level in USD/JPY, which is now seen as a practical intervention ceiling.

Banxico Signals No Urgency to Cut Rates

Bank of Mexico Deputy Governor Jonathan Heath said the central bank can wait before reducing interest rates, indicating that any further easing is more likely to come in about a year or more. He described the current monetary-policy stance as appropriate and pointed to persistent core inflation as a reason for caution.

The remarks signaled that Banxico remains focused on inflation persistence rather than moving quickly toward rate cuts, keeping Mexico among the central banks maintaining a restrictive stance despite broader global debate over the timing of policy easing.

ECB September Hike Expectations Hold as Leadership Questions Build

Expectations remained in place for the European Central Bank to raise its deposit rate by 25 basis points to 2.50% at its September meeting, with markets and analysts looking for the Governing Council to retain a data-dependent, meeting-by-meeting approach.

New ECB staff projections are expected to reflect slightly softer near-term inflation data but continued upside risks further out, particularly as natural-gas prices have risen sharply. For the third quarter of 2026, natural-gas prices were cited as running close to 30% above the ECB’s June projections even though oil prices were about 15% lower over the same period.

Eurozone activity data remained relatively steady. The euro area composite PMI held at 52.0 in August, unchanged from July’s eight-month high, while services eased to 51.6 from 51.7 and manufacturing momentum improved. At the same time, speculation over ECB leadership succession increased ahead of German Chancellor Friedrich Merz’s meeting with ECB officials next week, with questions persisting over whether Christine Lagarde will complete her term through October 2027.

Australian Rate Expectations Firm After Stronger Domestic Data

The Australian dollar held near 0.7210 during the reporting window as domestic rate expectations firmed and broader U.S. dollar weakness provided additional support. Reporting linked the move to stronger Australian data and rising expectations that the Reserve Bank of Australia could still tighten policy if inflation pressures persist.

The move also reflected the global central-bank backdrop, with Waller’s comments reducing immediate U.S. tightening pressure while leaving the Fed’s near-term path dependent on inflation and labour-market data.

Geopolitics, Energy & Commodities

Hormuz Supply Risks Keep Oil Elevated Below $90

Oil markets remained focused on the Strait of Hormuz as U.S.-Iran tensions persisted and the U.S. military escorted tankers through the waterway earlier in the week. WTI crude traded around $89.50 in Asian hours and near $88.65 in European trading, while continuing to struggle to sustain a move above $90 per barrel.

Persian Gulf export flows remained well below pre-war levels. Reporting cited estimates that total Persian Gulf oil exports, including bypass pipeline volumes, are roughly 50% of pre-war levels, while tracking remains difficult because some vessels switch off transponders during transit. U.S. officials have estimated flows near 10 million barrels per day, while shipping trackers have put them in a 4 million to 8 million barrel per day range.

The combination of disrupted flows, military escorts and uncertainty over any U.S.-Iran de-escalation kept supply security at the center of energy-market pricing during the reporting period.

European Gas Climbs Above EUR70/MWh as Storage Lags Seasonal Norms

European gas prices rose above EUR70/MWh, their highest level since March, as lower Persian Gulf LNG supply and strong Asian spot buying tightened the market. EU LNG imports fell about 16% year on year between April and July.

Storage levels remained a central concern. EU storage was around 65% full at the end of August, well below the 82% five-year average, and inventories were projected at 72% to 73% at the start of the heating season. That would leave stocks below the headline 90% target and potentially below the flexible 75% threshold cited in the reporting.

The lower storage position raised the prospect of faster purchases by some member states as winter approaches, helping keep a floor under prices.

Upcoming Key Events

• U.S. August Nonfarm Payrolls — 12:30 GMT: The Bureau of Labor Statistics is due to release August payrolls, unemployment and wage data, a key input into the Federal Reserve’s September policy decision.
• Canada August Labour Force Survey — 2:30pm Central European Time: Canada is due to publish August employment data after nearly 75,000 jobs were added in the previous month, with consensus cited at a 15,000 increase.
• Bank of Japan September Policy Meeting — null: Markets were reported to be fully pricing in an interest-rate increase at the BoJ’s September 16-17 meeting after officials signaled a more flexible approach to tightening.
• European Central Bank September Rate Decision — null: Markets broadly expect the ECB to raise the deposit rate by 25 basis points to 2.50% while maintaining a data-dependent, meeting-by-meeting policy approach.