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 data continues to show progress, helping push the U.S. Dollar Index below 99.00 and lifting gold more than 2%.
• The Japanese Yen strengthened sharply as Bank of Japan officials signalled a more flexible approach to rate increases, reports indicated the BoJ is leaning toward a 25 basis-point hike to 1.25% this month, and Tokyo reiterated that it remains ready to intervene in currency markets.
• WTI crude traded around $89.50 after earlier climbing to just below $91, with oil markets still focused on restricted Hormuz shipments, U.S. military tanker escorts and renewed U.S.-Iran strikes.
• Brent crude closed above $95, while Persian Gulf oil exports were described as running at roughly half of pre-war levels, underscoring continued supply disruption across regional energy markets.
• European gas prices rose above EUR70/MWh, the highest since March, as lower Persian Gulf LNG supply and strong Asian spot buying cut EU LNG imports by about 16% year on year between April and July.
• A Reuters poll of 65 economists and separate market previews pointed to a 25 basis-point European Central Bank rate increase next week that would take the deposit rate to 2.50%.
• Bank of England Chief Economist Huw Pill reiterated his support for raising Bank Rate to 4.00%, saying policymakers cannot wait for uncertainty around the Middle East conflict and energy prices to clear before acting.
• Bank of Mexico Deputy Governor Jonathan Heath said rate cuts can wait and described current policy as appropriate, adding that any further easing is more likely in about a year or more as core inflation persists.
• The Dow Jones Industrial Average traded near 53,750, up 1.3% and on track for its strongest session since early August, while the U.S. Dollar Index fell about 0.67% to around 98.90.
• The Wall Street Journal reported that U.S. Defense Secretary Pete Hegseth is extending troop deployment timelines across the Middle East through 2027, signalling that the conflict could last longer.

Market Developments

Foreign Exchange

The U.S. Dollar Index fell below 99.00 to around 98.90, down 0.67% on the day and at its lowest level in more than a week, while USD/JPY dropped as much as 2.07% to around 155.40 and was also reported near 158.20-158.70 during the session as the Yen rallied on BoJ signals and intervention concerns.

Commodities

Gold rallied more than 2% on Thursday and traded around $4,470 in early Asian dealings after rebounding above $4,450, while WTI crude reached session highs just below $91 before trading around $89.50 and Brent rose 1.0% to settle at $95.63 after touching roughly $97 intraday.

U.S. Equities

The Dow Jones Industrial Average traded near 53,750, up 1.3% and on track for its strongest session since early August after Waller said he would be inclined to support a hold at the September 15-16 Fed meeting if incoming inflation data keeps improving.

Macroeconomics & Central Banks

Waller Signals Conditional September Hold as Dollar Falls and Gold Jumps

Federal Reserve Governor Christopher Waller said he would be inclined to support leaving rates unchanged at the September policy meeting if August CPI data confirms that inflation pressures are continuing to cool. Speaking at the Reuters NEXT Newsmaker event in Washington, Waller tied his stance to the next inflation reading, shifting market focus toward the final key data releases ahead of the Fed decision.

The comments helped weaken the U.S. Dollar and ease rate-hike expectations across markets. The U.S. Dollar Index fell below 99.00 to around 98.90, down 0.67% on the day after reaching 99.86 on Wednesday, while gold rallied more than 2% on Thursday and traded around $4,470 in early Asian dealings after rebounding above $4,450. The Dow Jones Industrial Average traded near 53,750, up 1.3% and on track for its strongest session since early August.

The shift in tone came as markets also looked ahead to the U.S. August jobs report and the September 15-16 Fed meeting. Several cross-asset moves during the session, including gains in the euro, pound and Canadian dollar against the U.S. currency, were linked to the softer dollar backdrop created by Waller’s remarks.

Yen Surges as BoJ Rate-Hike Signals Strengthen and Tokyo Warns on FX Moves

The Japanese Yen rallied sharply after a series of hawkish Bank of Japan signals and renewed intervention warnings from Tokyo. USD/JPY was reported down 2.07% on the day at around 155.40, while other reports put the pair near 158.20-158.70 after a drop of more than 1%, highlighting the scale of the move across the session.

BoJ board member Hajime Takata said the central bank should adopt a more flexible approach to future rate increases and move beyond a rigid pattern of raising rates every six months. He said a standard 25 basis-point increase was not necessarily set in stone and that back-to-back hikes could also be considered. Reports also indicated the BoJ is leaning toward raising its benchmark rate by a quarter point to 1.25% at the meeting ending on September 18, with investors described as fully pricing in a September hike.

Japan’s top currency diplomat Atsushi Mimura said authorities remain ready to intervene and that he was neither at ease nor satisfied with current foreign-exchange conditions. Separate market commentary described 160 in USD/JPY as an increasingly important practical intervention ceiling, while OIS pricing was cited as implying a 25 basis-point BoJ hike in September and roughly 44 basis points of tightening by year-end.

ECB Seen Raising Deposit Rate to 2.50% Next Week

Expectations for a European Central Bank rate increase next week remained firm. A Reuters poll of 65 economists found consensus for a 25 basis-point rise in the deposit rate to 2.50%, while separate market previews also pointed to the same outcome.

Policy guidance is seen remaining limited even if the ECB delivers the increase. The Governing Council is expected to reiterate its meeting-by-meeting, data-dependent approach, with new staff projections likely to justify a hike as inflation risks remain tilted to the upside despite slightly softer recent data.

Eurozone activity indicators in the background remained mixed but stable enough to support that policy path. Euro area composite PMI for August held at 52.0, unchanged from July’s eight-month high, while the services PMI eased to 51.6 from 51.7. In Germany, services PMI edged down to 49.7 from 49.8, but new business rose for a second month and export orders increased for the first time since February.

BoE’s Pill Repeats Case for Raising Bank Rate to 4.00%

Bank of England 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 be resolved before acting. His comments underscored concern about inflation persistence and the risk of catch-up effects becoming embedded.

Pill’s remarks also helped support sterling resilience during a session dominated by a weaker U.S. dollar. The pound rose against the dollar even as stronger U.S. services data limited gains.

Banxico’s Heath Says Rate Cuts Can Wait

Bank of Mexico Deputy Governor Jonathan Heath said the central bank can wait before reducing interest rates and described the current monetary-policy stance as appropriate. He said further easing remains possible, but more likely in about a year or more, as core inflation continues to persist.

The remarks signalled a cautious approach to policy easing and stood in contrast to the softer tone that emerged from the Federal Reserve during the session.

Geopolitics, Energy & Commodities

Oil Holds Elevated Levels as Hormuz Disruptions and U.S.-Iran Strikes Keep Supply Risks in Focus

Oil prices remained elevated as markets tracked continued disruption to Persian Gulf flows and a worsening U.S.-Iran security backdrop. WTI reached session highs just below $91 per barrel, almost 10% higher on the week at one stage, before trading around $89.50 in Asian hours. Brent rose 1.0% to close at $95.63 after touching roughly $97 intraday.

Supply concerns centred on the Strait of Hormuz, where shipments were described as restricted and the U.S. military had escorted tankers earlier in the week. Separate reporting said the United States carried out a second round of attacks in three days, targeting radar systems and mine-laying capabilities along Iran’s southern coast, while Iran retaliated against U.S. bases across the Middle East.

Persian Gulf producers were described as increasingly willing to move crude through the Strait and offer more barrels outside it, but total regional oil exports, including bypass volumes, were still estimated at roughly 50% of pre-war levels. U.S. officials were cited as estimating flows near 10 million barrels a day, while shipping trackers put them at 4 million to 8 million barrels a day, underscoring the uncertainty around real-time supply data.

European Gas Climbs Above EUR70/MWh as LNG Supply Tightens and Storage Lags

European gas prices climbed 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 by about 16% year on year between April and July.

Storage levels also remained well below seasonal norms. EU storage was around 65% full at the end of August, compared with an 82% five-year average, and inventories were projected at 72% to 73% at the start of the heating season, below the headline 90% target and potentially below the flexible 75% threshold.

The combination of lower storage and reduced LNG inflows pointed to the risk of faster purchases by some member states as winter approaches, keeping a floor under prices.

U.S. Extends Middle East Troop Deployments Through 2027, WSJ Reports

The Wall Street Journal reported that U.S. Defense Secretary Pete Hegseth is extending troop deployment timelines across the Middle East through 2027. The move was described as a signal that the conflict could drag on for longer, adding to the broader geopolitical backdrop already affecting energy markets and regional security conditions.

Upcoming Key Events

• U.S. August Nonfarm Payrolls Report — null: The U.S. jobs report is due later on Friday and is one of the final major data releases ahead of the Federal Reserve’s September policy meeting.
• European Central Bank Rate Decision — null: The ECB is scheduled to meet next week, with economists and market previews pointing to a 25 basis-point increase in the deposit rate to 2.50%.
• Bank of Japan Policy Meeting — null: The BoJ’s meeting ending on September 18 is in focus after reports said the central bank is leaning toward a 25 basis-point rate increase to 1.25%.
• Federal Reserve September Policy Meeting — null: The Fed’s September 15-16 meeting remains in focus after Christopher Waller said he would be inclined to support a hold if August inflation data continues to improve.