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Tuesday, September 29, 2026
What’s happening: The US dollar traded higher this morning as investors monitored the Federal Reserve’s policy outlook.
What happened: Investors widely expect the Fed to hike its benchmark interest rates again to control inflation due to the ongoing US-Iran conflict.
Crude oil prices extended their gains this morning, sending the US dollar index close to two-month highs.
Why it matters: Oil prices continued their bullish run as Iranian officials expressed doubt around securing a deal ahead of November’s US midterms, after President Donald Trump rejected Tehran’s proposal to reopen the Strait of Hormuz and end the conflict.
Ongoing energy supply risks have raised inflationary concerns, increasing speculations of a more hawkish stance from the Federal Reserve. US Treasury yields also remained above the key 5% level, at multi-decade highs, providing further support to the US dollar.
Earlier this month, the Fed raised its benchmark interest rates by 25bps to 3.75%-4.00%. Various Fed officials said additional rate increases could be required, citing resilient economic growth and a robust labour market.
Fed Governor Lisa Cook warned that AI-driven productivity gains might not be enough to counter near-term price pressures, which are expected to drive broader inflation in the economy. Markets are now pricing in another rate hike of 25bps in October.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose to 101.24 this morning, remaining close to two-month highs.
Investors also continued monitoring developments in the Japanese forex market after US Treasury Secretary Scott Bessent and Japan’s Finance Minister Satsuki Katayama reaffirmed their commitment last week to jointly address weakness in the Japanese yen.
The USD/JPY forex pair edged higher to 157.44 this morning. The EUR/USD forex pair slipped to 1.1369, while the GBP/USD pair edged lower to 1.3251.
What to watch: Investors will continue monitoring rising oil prices, US Treasury yields and comments from Fed members.
Markets now await the release of data on S&P/Case-Shiller home price index (1700 UAE Time), JOLTs job openings (1800 UAE Time) and CB consumer confidence (1800 UAE Time) from the US today. The S&P Cotality Case-Shiller home price index, which rose 2.1% year-over-year in June, is expected to surge by 2.2% in July. Job openings in the US, which rose by 89,000 to 7.271 million in July, are expected to climb to 7.24 million in August. Analysts expect the CB consumer confidence to rise to 90 in September from the previous reading of 89.4.
Data on the Fed’s preferred inflation gauge, due this Wednesday and the NFP (nonfarm payrolls) report, scheduled this Friday, will also remain in focus.
Context: Equity markets in Europe closed mixed on Monday as investors assessed remarks from ECB President Christine Lagarde.
Details: The European Central Bank’s President indicated that inflation projections for 2027 and 2028 have increased from what policymakers had projected a few months back, due to higher energy prices. Lagarde emphasised that a measured policy response remains the most appropriate way to control prices.
Investors are already pricing in interest rate hikes of around 100 bps by the end of next year. Global bond yields also moved elevated amid rising inflation concerns and higher speculations of further policy tightening.
The lack of progress in talks to reopen the Strait of Hormuz provided a further boost to crude oil prices, fuelling global inflationary concerns.
UK’s housebuilders were among the top performers on Monday, with shares of Persimmon, Barratt Taylor Wimpey and Vistry Group rising sharply after the British government confirmed a new equity-loan programme called “Your First Home” for first-time buyers for next month’s budget.
The STOXX Europe 600 Index rose slightly to 638.68 on Monday, while France’s CAC 40 gained 0.01% to 8,078.48. Germany’s DAX 40 declined 0.13% to 25,374.42, while the UK’s FTSE 100 fell 0.1% to close at 10,684.88.
What to watch: Data on economic sentiment (1300 UAE Time), consumer confidence (1300 UAE Time) and industrial sentiment (1300 UAE Time) from the Eurozone will be released today. The Eurozone’s economic sentiment indicator, which surged for the fourth straight month to 98.4 in August, is expected to rise further to 99 in September.
Analysts expect consumer confidence in the Eurozone to decline to -16.5 in September from -15.5 in the previous month, while industrial confidence indicator is expected to edge higher to -4.8 in September from -5.3 in August.
Investors also await the release of key inflation data from the Eurozone this week for further indication of the ECB’s monetary policy stance.
Other Markets: Asian markets traded lower this morning, with Japan’s Nikkei 225, Hong Kong’s Hang Seng index and China’s CSI 300 index down by 0.90%, 0.66% and 0.14%, respectively.
Pope Leo urged Russia and Ukraine to sit down and discuss the way to end the ongoing war. The news sent the USD/RUB forex pair higher in forex trading this morning.
Australia’s household spending came in flat in August, after July’s 1.1% gain. The lack of any rise after three straight months of growth exerted pressure on the AUD/USD forex pair.
UK’s shop price inflation slowed to 1.4% year-over-year in September from 1.5% in the previous month. However, the latest reading remaining above the three-month average level of 1.3% sent the GBP/USD pair lower in forex trading this morning.
Thailand’s domestic vehicle sales climbed 25.59% year-over-year to 59,808 units in August, following 20.07% growth in the previous month, which exerted pressure on the USD/THB forex pair.
India’s industrial production growth accelerated to 8.0% year-over-year in August from the previous month’s 7.4% gain. Despite this coming in above market estimates of 6.5%, the USD/INR pair rose in forex trading this morning.
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