Oil Shock Coincides With Higher Global Bond Yields as Dollar Gains Remain Modest

Global bond yields have moved higher while Brent crude remains above $100 a barrel, with continuing disruption and security concerns around Gulf shipping contributing to uncertainty over energy supply. Higher energy prices have coincided with renewed concerns about inflation and borrowing costs. The US dollar, however, has received comparatively limited support from higher US yields, leaving investors focused on how energy-price developments may affect expectations for the Bank of England (BoE), European Central Bank (ECB) and Federal Reserve (Fed).

Sterling is holding near recent highs against the US dollar, while EUR/USD is trading above 1.1600 ahead of today’s ECB policy decision.

Oil prices, bond yields and central-bank expectations are therefore among the factors currently influencing major FX markets. Market reactions remain uncertain and may depend on incoming economic data, existing positioning and developments in energy markets.

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GBP: Sterling Holds Firm Ahead of US PPI & ECB Decision

GBP/USD: 1.3552 | EUR/GBP: 0.8586

GBP/USD is holding near recent highs around 1.3552, while EUR/GBP is trading near 0.8586. With no major UK economic release scheduled today, movements in both pairs are being influenced mainly by US and euro-area rate expectations and broader market sentiment.

Higher US Treasury yields have so far coincided with only modest gains in the US dollar. At the same time, higher global energy prices may add to UK inflation pressures through their effect on household and business costs. If those pressures persist, they could influence expectations for the future path of BoE policy.

US PPI is the main near-term event for GBP/USD. A higher-than-expected reading could increase expectations of a September Fed rate hike and potentially support the US dollar, which may place pressure on GBP/USD. A lower-than-expected reading could reduce those expectations. Market reaction may also depend on the composition of the data and existing positioning.

For EUR/GBP, the ECB’s policy decision, economic projections and accompanying communication may influence expectations for the relative ECB and BoE rate paths.

The next significant scheduled UK data are due on Friday, including July GDP, Industrial Production and Manufacturing Production. These releases may provide further information on UK economic activity and could affect market expectations for future BoE policy.

Key technical reference levels for GBP/USD: Resistance sits near 1.3560, followed by 1.3650, while Support sits around 1.3480, followed by 1.3465.

Key technical reference levels for EUR/GBP: Resistance sits near 0.8600, followed by 0.8649, while Support sits around 0.8570, followed by 0.8553.

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EUR: EUR/USD Holds Steady as ECB Decision Takes Centre Stage

EUR/USD: 1.1641

EUR/USD is holding around 1.1641, close to a two-week high, as investors position ahead of today’s ECB decision. A 25-basis-point rate hike to 2.50% is widely expected and largely reflected in market pricing, reducing the likelihood that the expected rate move alone will determine the pair’s direction.

Attention is instead centred on whether today’s communication changes expectations for ECB policy beyond September. Updated economic projections will provide a fresh assessment of inflation and growth, while the press conference could give investors clearer guidance on whether policymakers see a need for further tightening later this year.

The distinction matters for EUR/USD because markets have already adjusted to the prospect of today’s hike. Guidance that leads investors to increase expectations of another ECB rate hike could support the pair, while comments that reduce those expectations could limit gains.

US PPI is due shortly after the ECB decision, creating a second major event risk for EUR/USD within a short period. A higher-than-expected reading could increase expectations of a September Fed rate hike and support the US dollar, while softer data could reduce those expectations.

The immediate direction in EUR/USD could therefore be shaped by how investors reassess the relative ECB and Fed rate paths after both events, rather than by the expected ECB hike alone.

Key technical reference levels for EUR/USD: Resistance sits around 1.1686–1.1710, while Support sits near 1.1609, followed by 1.1579.

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USD: DXY Holds Below 99 as Markets Await US PPI

DXY: 98.70

The Dollar Index (DXY) is trading below 99 after declining over recent sessions, while the US 10-year Treasury yield remains elevated near 4.85%.

Higher yields can increase the relative appeal of US assets, but they have provided only limited support to the US dollar in recent sessions.

Higher oil prices have also contributed to renewed inflation concerns. While persistent inflation could lead investors to expect tighter Fed policy, higher borrowing and energy costs may also affect expectations for economic growth.

August PPI is the next scheduled US inflation release. A material upside or downside surprise could affect market expectations for the Fed's 15-16 September meeting.

Interest-rate markets currently imply roughly a 60% probability of a September Fed rate hike, although that pricing could change following PPI today and CPI on Friday.

Friday’s Consumer Price Index (CPI) release will provide additional information on consumer-price inflation before the Fed meeting.

Despite elevated Treasury yields, DXY remains below 99, highlighting the recent divergence between US yields and the dollar. Whether that divergence persists may depend on incoming inflation data and broader market positioning.

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Other Currencies: Fresh BoJ Signals Keep Yen in Focus

USD/JPY: 153.43 | GBP/JPY: 207.99

USD/JPY is trading near 153.50, while GBP/JPY remains around 207.80 as markets assess fresh comments from BoJ policymaker Kazuyuki Masu. Both pairs remain close to their recent lows following the yen’s sharp gains earlier this week.

Masu said today that interest rates are expected to continue rising while financial conditions remain accommodative. He also indicated that faster rate hikes could become necessary if inflation accelerates, with underlying inflation now approaching the BoJ’s 2% target. The comments may reinforce expectations of continued policy tightening beyond the widely expected September rate hike.

For USD/JPY, changes in BoJ rate expectations remain an important driver alongside today’s US inflation data and its potential effect on Fed policy expectations. GBP/JPY is similarly exposed to changes in Japanese rate expectations, while Friday’s UK economic data could introduce a fresh Sterling-specific influence.

Masu’s comments add a fresh policy signal for investors assessing the pace of future BoJ rate hikes, keeping USD/JPY and GBP/JPY sensitive to changes in Japanese rate expectations.

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Current Rate Table

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Market Lookahead

Thu, Sep 10

• ECB Interest Rate Decision
• US Producer Price Index (PPI) & Core PPI (Aug)
• US Initial Jobless Claims
• ECB President Lagarde Press Conference & Updated Economic Projections

Fri, Sep 11

• UK GDP, Industrial & Manufacturing Production (Jul)
• UK Goods Trade Balance (Jul)
• US Consumer Price Index (CPI) & Core CPI (Aug)

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