Market News

Trump's comments to Axios add a fresh layer of uncertainty to an oil market already struggling to price the war's trajectory, echoing JP Morgan's own admission this week that it has no clear baseline view for crude. A resumption of major US combat operations against Iran would raise the risk of further attacks on Gulf energy infrastructure and shipping, the scenario Saudi Arabia and Qatar are understood to have flagged when they helped persuade Trump to hold off in August. Conversely, any sign that Tuesday's meeting with Gulf leaders tilts toward renewed diplomacy could ease some of the risk premium currently built into oil prices, though traders are likely to treat that as a low probability outcome given Trump's repeated threats over…

JP Morgan's own numbers point to a market pricing meaningfully more risk than the bank's fair value model can justify, with Brent trading near $106 against an estimated fair value of around $90 for September. That roughly $16 gap reflects the market's own assessment of further supply-loss risk beyond the estimated 10 million barrels per day already disrupted by the war, rather than a mispricing the bank expects to close quickly.

Record diesel prices heading into peak winter demand, alongside gasoline near multi-year highs, point to refined product markets tightening faster than crude itself, a dynamic traders will watch closely as inventories are drawn down further. With JP Morgan flagging genuine model uncertainty rather than a…

Today’s strike adds to an already severely stretched oil supply picture, with the Strait of Hormuz, the Bab al-Mandeb Strait, and Saudi Arabia's East-West pipeline all actively disrupted by the war. The attack on a tanker moving under direct US Navy escort marks a sharp escalation, proving that even protected convoys—designed specifically to keep crude and product flows moving through the blockade—are under direct fire. Oil prices have remained elevated for months due to ongoing Hormuz blockades, the shutdown of Saudi's main pipeline workaround, and Houthi advances along the Bab al-Mandeb route. This direct hit on an escorted vessel guarantees a fresh risk premium. The ultimate scale of the market reaction will depend on incoming details…

Today's appearance is a routine parliamentary hearing rather than a policy decision, so the direct market impact should be limited unless Bullock's answers shift the tone from recent RBA communication. Even so, any fresh comment on inflation persistence or the labour market could move rate pricing ahead of the September 28-29 meeting, where a further 25 basis point increase is currently priced at around 70 to 75%.

The Australian dollar and short end yields are the most likely to react to any hawkish or dovish surprise in the Q&A, given how closely positioned markets already are for a hike. With trimmed mean inflation still running above the RBA's 2 to 3% target band, traders will be listening for any signal on how much more tightening the…

With a quarter point hike now close to fully priced, the tradeable content today sits less in the decision itself and more in Governor Ueda's guidance on what follows it. USD/JPY has already fallen from around 160 to near 153 over recent weeks as hike odds built, which leaves room for a "buy the rumour, sell the fact" reaction if Ueda's tone stays cautious and data dependent. Goldman Sachs argues a faster tightening path would put upward pressure on Japanese government bond yields and could support the yen further by narrowing the policy gap with other major central banks, though the read-through for the Nikkei is more mixed, since a firmer yen tends to weigh on exporter earnings even as higher rates pressure valuations elsewhere. <a href="https://investinglive.com/central-banks/boj-hike-next-week-is-a-given-the-real-question-is-pace-and-terminal-rate/"…

Japan's inflation data typically carries limited standalone weight on the yen and JGB yields when a Bank of Japan decision lands the same day, and today looks no different. Traders are more focused on the outcome of the BoJ meeting and Governor Ueda's press conference this afternoon than on the CPI print itself, given a rate hike is already close to fully priced by swap markets. A core reading in line with the 1.8% consensus would likely do little to alter that path, while a surprise miss or beat could still nudge USD/JPY and short-dated JGB yields in the hours before the policy announcement. Some analysts have also flagged the chance of yen intervention chatter resurfacing around the thin Silver Week holiday trading conditions that…

• US September Philly Fed business index +37.8 vs +30.5 expected
• US August housing starts 1.275m vs 1.309m expected
• US initial jobless claims come in at 196K vs 208K estimate
• Canada August producer price index +1.3% m/m vs +0.6% prior
• BOE's Bailey: Decision on rates will get more difficult the longer the Iran conflict continues
• US August pending home sales +0.3% vs -0.6% expected
• Former Atlanta Fed President: The inflation portion of the Fed mandate is far more concerning
• Trump says he faces a “big decision” on whether to launch new attacks on Iran
• China privately asks Iran to help rein in Houthis after Saudi appeal, sources say

Markets:

• Gold up $81 to $4343
• US 10-year yields down 9 bps to 4.93%
• WTI crude oil down $1.29 to $101.14
• AUD leads, USD lags
• S&P…

Plenty of big events to come during the Asian timezone today. I'll get previews posted of all of these separately, just a few brief notes for now. 

Japanese inflation data for August. We have already seen Augusy CPI data for the Tokyo area:

• Tokyo core CPI rose 1.8% y/y in August, beating forecasts of 1.7% and nearing the BOJ's 2% target, with the closely watched core-core measure hitting 2.0%, adding to the case for a September rate hike.

I don't want to overplay the importance of this data from Japan due only hours before the Bank of Japan statement, its not as if the Board is hanging on these numbers. From all we've divined in the past week or so, the rate hike today is agreed to already, just awaiting a rubber stamp of approval:

• Preview:…

U.S. stocks closed sharply higher, with the Nasdaq Composite and Nasdaq 100 leading the advance. The rally was broad enough to lift all five major indices, although small-cap stocks lagged behind their technology-heavy counterparts.

Falling Treasury yields provided an important tailwind. The 10-year yield declined nearly 7 basis points, while the 30-year moved further below 5.00%. Lower yields reduce the discount rate applied to future corporate earnings, which tends to be especially supportive for growth and technology stocks.

Semiconductor shares were among the strongest performers, with Super Micro Computer, Astera Labs, Arm, Intel and AMD all posting substantial gains.

U.S. stock indices close higher

• Dow Industrial Average rose 316.03…

The AUDUSD moved sharply lower following yesterday’s FOMC rate decision, but the selling momentum started to slow when the price reached an important technical support area.

The decline extended to approximately 0.7078, where two key technical levels came together:

• The rising 100-day moving average at 0.70795
• The 50% retracement of the move up from the end-of-July low at 0.70773

When different technical tools identify nearly the same price, that area tends to attract more attention from traders. Some traders may focus on the moving average, while others may be watching the retracement level. When both point toward the same area, it can create a stronger support or resistance target.

In this case, the combination did a good job of slowing the…

The Fed has set out to tackle inflation and they certainly have the tools to get the job done. How aggressively they use those tools and how the economy responds is less certain, so is the geopolitical backdrop.

At the moment, the market is pricing in the thinnest rate hike in US history so the consensus is that inflation will be tamed relatively easily. I think it's worth considering how much work needs to be done on inflation and what are the driving factors behind it. Here are five that I'm thinking about:

1) The Iran war

No surprise at the top of the list. We had oil up in 11 of 12 days from the start of the month before a tiny pullback. We look to be at some sort of stalemate in the war that has global supply stuck below global demand.…

US President Trump told Axios he is at a “critical juncture” regarding the war in Iran:

• The officials say Trump needs to decide soon on the way forward, partly because the US military can't stay in its current holding pattern much longer. “At some point you have to decide what is the end game.”
• Trump and Hegseth have ordered the military to maintain its level of forces in the Middle East until the end of the year, to remain ready for a potential return to full-scale combat.
• Trump declined to say whether he'll decide on the path forward before or after the midterms.
• “I have a big decision coming up. Do I want to go in and annihilate them [the Iranian regime] or do I not? It's a big decision. Anything could happen with me.”

Analysis: The…