Markets are starting the week after Friday’s stronger-than-expected US jobs report, which increased expectations that the Fed could raise rates at its September meeting. However, US markets were closed yesterday for the Labor Day holiday, so liquidity was lower, allowing USDJPY to make some sharp move once again. Middle East tensions also remain an important focus, especially around Iran and the Strait of Hormuz, keeping crude oil elevated and adding to inflation concerns. This is important because higher oil prices can keep pressure on inflation and support higher yields and interest rates. Looking ahead, we have a busy second half of the week, with US PPI and the ECB rate decision on Thursday, followed by the key US CPI report on Friday. After the strong jobs data, inflation numbers will be especially important for the Fed outlook, so US yields should remain one of the main drivers for the dollar, stocks, metals and crypto this week.
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