TMGM Daily Market Breakfast: 8 September 2026

Morning Snapshot

• Oil remained elevated after fresh attacks and shipping risks in the Middle East, with Brent trading near $97 and WTI moving around the $90-$91 area as supply disruptions through the Strait of Hormuz stayed in focus.
• A reported strike on Saudi Aramco facilities in Jizan added to energy-market tensions, with the extent of the damage still being assessed.
• The Japanese Yen strengthened sharply, pushing USD/JPY into the mid-153s and to its lowest level since February 18 as stronger Japanese wage and GDP data reinforced expectations of further Bank of Japan tightening.
• Markets increased focus on the Bank of Japan's 18 September decision, with overnight index swaps implying about 75 basis points of cumulative hikes by April 2027 and assigning odds to a move this month.
• The Euro held above 1.1600 as investors looked ahead to an expected ECB rate increase, supported by revised second-quarter Eurozone growth of 0.6% and stronger investor sentiment.
• Euro area inflation expectations remained central to the ECB outlook after August flash inflation rose to 3.3% year on year, its strongest reading since late 2023.
• U.S. inflation data became the key near-term policy focus after strong August payrolls revived expectations of a September Federal Reserve rate increase.
• Markets were pricing a probability of just under 60% for a Fed rate hike in less than two weeks, leaving the dollar sensitive to this week's PPI and CPI releases.
• OPEC+ kept October output quotas unchanged as producers weighed persistent disruptions in the Persian Gulf and reviewed 2027 quota baselines.
• UK Chancellor John Healey said the government would continue pursuing fiscal discipline as Britain faces historically high borrowing costs and fragile growth.

Market Developments

Energy

Brent crude traded near $97 per barrel after settling at $96.28 on Friday, while WTI traded around $90-$91 after settling at $91.48 and reaching as high as $91.15 on Monday, with weekly gains of nearly 8% for Brent and almost 10% for WTI reported as Middle East supply risks intensified.

Foreign Exchange

The Japanese Yen rallied strongly, driving USD/JPY into the mid-153.00s and to its lowest level since February 18, while EUR/JPY fell 1.11% to around 179.45 and EUR/USD held modest gains above 1.1600.

Energy & Geopolitics

Middle East Shipping Risks Keep Oil Elevated as OPEC+ Holds Output Steady

Oil prices stayed elevated as renewed U.S.-Iran strikes, tanker risks around the Strait of Hormuz and broader disruption to Middle East energy flows kept supply concerns high. Brent crude traded near $97 per barrel, after rising from an intraday low of $93, while WTI moved around the $90-$91 range after settling at $91.48 on Friday and reaching about $91.15 on Monday, its highest level since July 24.

The market backdrop remained tight even though oil continued to move through the Strait of Hormuz. The U.S. energy secretary said flows through the waterway were averaging a little more than 9 million barrels a day with U.S. Navy escorts in place. ING said Iran plans to enforce a new restricted zone outside the Strait, a move that could put additional vessels in the Gulf of Oman at risk.

OPEC+ kept October output quotas unchanged. Reuters sources cited by Danske Bank said the group is likely to pause further output increases in the fourth quarter while it reviews 2027 quota baselines. ING said the earlier announced increases this year fully unwind 1.65 million barrels a day of voluntary cuts, but ongoing Persian Gulf disruptions mean many producers are still likely to remain below quota.

Supply concerns were compounded by strains in refined products. One report said the market has enough crude oil but not enough diesel, while ING said European gas prices were also under pressure, with TTF up almost 4% in early trading as LNG flows lagged crude shipments. Speculative positioning also strengthened, with ICE Brent net longs rising by 37,837 lots to 261,435 lots in the latest reporting week.

Reported Strike on Saudi Aramco's Jizan Facilities Adds to Supply Concerns

Saudi Aramco oil facilities in Jizan were hit on Monday, the Financial Times reported, with the extent of the damage still being assessed. The reported strike added to already heightened concern over Middle East supply security and helped push WTI above $90 during Monday's trading.

The incident came as energy markets were already reacting to months of conflict in the region and fresh weekend exchanges involving the United States and Iran. The additional threat to Saudi infrastructure reinforced the market's focus on the resilience of regional production and export routes.

Macroeconomics & Central Banks

Yen Surges as Stronger Japanese Data Reinforce Bank of Japan Tightening Expectations

The Japanese Yen extended its rally, sending USD/JPY into the mid-153.00s and to its lowest level since February 18, as stronger domestic data and increasingly hawkish policy expectations reinforced the case for further Bank of Japan tightening. EUR/JPY fell 1.11% to around 179.45 as the yen's advance broadened across major crosses.

The move was linked to upbeat Japanese wage and GDP data, capital repatriation and the unwinding of yen-funded carry trades. Reports also cited suspected intervention and comments from Japanese officials and policymakers that encouraged markets to consider a steeper tightening path.

Expectations for the 18 September Bank of Japan meeting intensified. HSBC said overnight index swaps imply around 75 basis points of cumulative hikes by April 2027 and assign meaningful odds to a move this month. The bank said recent catalysts included comments linked to U.S. Treasury Secretary Bessent's meeting readout with Governor Kazuo Ueda and remarks from BoJ board member Hajime Takata that outsized rate increases of more than 25 basis points and back-to-back hikes are possibilities.

Euro Holds Above 1.1600 as ECB Rate Increase Comes Into View

The Euro held gains above 1.1600 as investors positioned for an expected European Central Bank rate increase this week and absorbed firmer Eurozone activity data. EUR/USD traded around 1.1625 in early Asian dealings after modest gains on Monday.

The Eurozone revised second-quarter GDP growth up to 0.6% from a 0.4% consensus, while the Sentix investor survey rose to 5.1 from 0.9. At the same time, German industrial production disappointed in July, leaving the regional picture mixed but still firm enough to support expectations of further ECB tightening.

Several reports pointed to a 25 basis point ECB increase on Thursday, which would take the policy rate to 2.50%. BBH said the swaps curve is fully pricing rates at 3.00% over the next 12 months. Societe Generale said August flash euro area inflation rose 0.4 percentage point to 3.3% year on year, its strongest reading since late 2023, and projected headline inflation peaking around 3.7%-3.8% in early 2027, with core inflation peaking around 2.7%-2.8% in mid-2027.

Higher energy costs remained part of the policy backdrop. BBH noted Brent crude and natural gas prices were 8% and 44% higher, respectively, than at the time of the June ECB meeting. Another report said Thursday's decision is likely to be accompanied by relatively hawkish language and no suggestion that the hiking cycle is over.

U.S. Inflation Data Becomes Decisive for September Fed Meeting

U.S. inflation data moved to the centre of the Federal Reserve outlook after a strong August payrolls report revived expectations of a September rate increase. Reports said the labour-market data did not settle the policy debate, leaving this week's producer and consumer price releases as the key inputs before the Fed's decision.

BBH said a September 16 rate increase hinges on Friday's August CPI report, while Commerzbank said markets were pricing a probability of just under 60% for a hike in less than two weeks. New York Fed President John Williams and Fed Governor Christopher Waller had earlier pointed to encouraging inflation trends, but Fed Chair Kevin Warsh said at Jackson Hole that better summer PCE and CPI readings did not yet show underlying trends had meaningfully improved.

Thursday's PPI release was described as a warm-up for Friday's CPI report. BBH said the August rise in the ISM Prices Paid index pointed to upside inflation risks, while slower average hourly earnings growth remained an important disinflationary force. The combination left the dollar sensitive to incoming inflation data and the Fed's final pre-meeting assessment.

Bank of Canada Holds a More Hawkish Tone as Inflation Risks Stay in Focus

The Bank of Canada's latest policy stance was described as more hawkish, with greater emphasis on upside inflation risks even as core inflation remains subdued. TD Securities said the central bank appeared less concerned about trade uncertainty and more focused on the risk that higher energy prices feed into headline inflation.

TD said the overnight rate is expected to remain at 2.25% through 2026 before returning to a 2.75% neutral setting in 2027 through two 25 basis point increases. The report said oil prices had largely normalised after moving above $100 a barrel during the U.S.-Iran conflict, but the shock had still pushed headline CPI near the top of the Bank's 1%-3% target range.

Trade tensions also remained part of the policy backdrop. TD said Section 338 tariffs introduced on August 22 had escalated trade strains, but argued they should not prevent rate increases in the first quarter of 2027 if there is no further escalation.

ECB Backstop Faces Fresh Scrutiny Amid Eurozone Political Strains

The ECB's Transmission Protection Instrument, designed to support Eurozone government bonds during market stress not justified by fundamentals, came under renewed scrutiny as political tensions in major member states drew attention to the limits of the bloc's policy backstops.

Rabobank said Germany, France, Italy and Spain account for 60% of Eurozone GDP and questioned how smoothly the framework would operate if several of the region's largest political economies faced simultaneous turmoil. The report highlighted comments from French far-left presidential candidate Jean-Luc Melenchon proposing the cancellation of French state debt held by the ECB, while noting that nationalist candidate Marine Le Pen remained the election favourite and had pledged a fiscal-deficit rule and spending cuts.

The discussion underscored that the ECB's anti-fragmentation tools remain part of the broader market backdrop as the central bank continues tightening policy.

Government Policy

UK Chancellor Reaffirms Fiscal Discipline as Borrowing Costs Stay High

UK Chancellor John Healey said the government would build on earlier efforts to restore fiscal discipline as Britain contends with historically high borrowing costs. In scheduled remarks, Healey said global shocks are being felt keenly in the UK and that growth remains fragile even though the economy was the fastest-growing in the G7 in the first half of 2026.

Healey said productivity is finally picking up and pledged to draw a line under rising costs in the economy. He also said the upcoming budget would set out a roadmap to fiscal devolution.

On artificial intelligence, Healey said the government would not let the opportunity pass by but would not allow the technology to proliferate without oversight, citing national-security concerns and the potential for major labour-market disruption.

Upcoming Key Events

• European Central Bank Policy Decision — null: The ECB is widely expected to deliver a 25 basis point rate increase this week and publish updated September macroeconomic projections.
• U.S. August PPI — null: Producer price data due on Thursday was described as a warm-up to the more consequential August CPI release for the Federal Reserve outlook.
• U.S. August CPI — null: Friday's consumer price report is seen as pivotal for the Federal Reserve's September decision after strong August payrolls revived rate-hike expectations.
• Bank of Japan Policy Decision — 18 September: Markets are assigning meaningful odds to a move at the Bank of Japan's 18 September meeting as expectations for faster policy tightening build.