Indonesian rupiah weakened as rising oil prices raised inflation fears and threatened the net oil importer's fiscal position.

Asian equities trade mixed on Tuesday as traders weighed Middle East tensions and calls by industry figures for a slowdown in AI development.

South Korea Money Supply Growth down to 8% in July from previous 9.4%

China’s Retail Sales rose 0.4% year-over-year (YoY) in August vs. a rise of 0.8% expected and a 0.6% growth in July, the latest data released by the National Bureau of Statistics (NBS) showed Tuesday.

China Fixed Asset Investment (YTD) (YoY) in line with expectations (-7.2%) in August

China Industrial Production (YoY) registered at 5.2% above expectations (4.8%) in August

China Retail Sales (YoY) below expectations (0.8%) in August: Actual (0.4%)

Iran's President Masoud Pezeshkian said on Monday that Tehran is not at war with Saudi Arabia. Pezeshkian added that Iran’s demands for negotiation with the United States (US) are the same as our previous demands.

New Zealand Electronic Card Retail Sales (MoM) dipped from previous 1.3% to -0.9% in August

New Zealand Electronic Card Retail Sales (YoY) fell from previous 3.4% to 0.2% in August

South Korea Import Price Growth (YoY) down to 15.6% in August from previous 18.7%

Brown Brothers Harriman’s (BBH) Elias Haddad expects the Federal Open Market Committee (FOMC) to deliver a 25 bps hike to 3.75%-4.00%, its first move since July 2023, justified by above-target inflation and a solid labor market.

Societe Generale economists Sam Cartwright and Michel Martinez analyze how renewed supply chain disruptions, including conflict in the Middle East, may affect Euro Area prices.

Scotiabank strategists Shaun Osborne and Eric Theoret highlight a weaker Japanese Yen (JPY), down 0.7% versus the US Dollar (USD) and underperforming G10 peers alongside New Zealand Dollar (NZD) and Swedish Krona (SEK).

Pfister and Liebke analyse 30 years of FOMC meetings to separate interest rate surprises from forward guidance shocks and their effect on the US Dollar and G10 currencies.

Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is weaker, down about 0.5% versus the US Dollar (USD), as risk aversion supports broad USD strength. Yield spreads imply a fair value near 1.1633, while data have been light ahead of Tuesday’s ZEW survey.

The US 10-year Treasury yield has breached the 5% threshold for the first time since 2023, rising by over 4 basis points as investors had almost fully priced in a 25-basis-point rate hike by the Fed on September 16. At the time of writing, the US 10-year is at 5.006%

Royal Bank of Canada (RBC) economist Abbey Xu notes that Canadian inflation stayed at 3% year-over-year in August, with Food and energy components still elevated but easing somewhat.

ING economists James Knightley, Padhraic Garvey and Chris Turner now expect a 25bp Federal Reserve rate hike in September following Chair Kevin Warsh’s Jackson Hole remarks.

Scotiabank strategists Shaun Osborne and Eric Theoret note the British Pound (GBP) is softer against the Dollar but still outperforming most G10 currencies in a risk-off environment. Markets expect a hawkish hold from the Bank of England (BoE) on Thursday, with a possible 25 bp hike in November.

Commerzbank’s FX Research team, including Charlie Lay and Dr. Henry Hao, highlight that Brent crude has surged on Strait of Hormuz hostilities but see scope for gradual de-escalation in coming months.

Nomura’s Global Markets Research team, led by Josie Anderson, George Buckley and Andrzej Szczepaniak, notes that Sweden’s 13 September election remains too close to call, with the centre-left only narrowly ahead.

Commerzbank economists note that August US CPI data were broadly in line with expectations but still too high for the Federal Reserve. They stress excessive underlying price pressure and say the Fed has already signaled readiness to hike.

Brown Brothers Harriman’s (BBH) Elias Haddad expects the Bank of England (BoE) to keep its policy rate at 3.75% with a likely 6–3 vote, as easing United Kingdom (UK) wage and services inflation allow a pause.

ING strategist Frantisek Taborsky outlines a busy Central and Eastern Europe (CEE) data calendar but stresses that the Czech National Bank (CNB) meeting is the key event. He expects rates to stay at 3.75% with dovish guidance, contrasting with still-hawkish market pricing.

Deutsche Bank’s Jim Reid and team say the Fed’s decision on Wednesday is the main market event, with their economists expecting a 25bp hike to 3.75%-4.00% and now forecasting 75bps of hikes over the next seven months.

European Central Bank (ECB) Executive Board member Isabel Schnabel said recent energy-price developments have been "quite concerning" as officials consider further interest-rate increases after last week’s move, Bloomberg reported.

According to a Reuters poll, the survey on September 9 showed that 86 of 101 economists expect the Federal Reserve (Fed) to hike interest rates by 25 basis points (bps) to 3.75%-4.00% on September 16. This is a dramatic shift from 65 of 93 economists expecting a hold in the previous poll.

Danske Bank’s Danske Research Team highlights a sharp move higher in Brent as escalating Middle East tensions threaten key supply routes. The report notes Brent’s jump above USD 107/bbl and warns that closure of Saudi Arabia’s East-West pipeline could endanger up to 4% of global Oil supply.

USD/JPY rebounds after posting modest losses the previous day, trading around 154.60 during European hours on Monday. The pair appreciates as the US Dollar (USD) gains amid rising oil prices and growing Federal Reserve (Fed) rate hike bets.