Macro

The dollar held near its weekly highs while the yen stayed under pressure as concerns over Middle East energy supply disruptions persisted. U.S. producer prices rose 0.4% in August, in line with expectations, driven mainly by a rebound in energy prices. Brent crude futures climbed above $100 a barrel and extended gains in Asia to $108.96. Risk aversion lifted the implied probability of a Fed rate hike next week to 70%, while the U.S. 10-year yield rose to 4.965%.

U.S. August producer prices rose and oil costs surged, fueling worries the Federal Reserve could raise interest rates at its meeting next Wednesday. Brent crude climbed 6% to $107 a barrel amid supply disruptions tied to geopolitical conflict, adding to inflation expectations. The 10year Treasury yield rose to multi-year highs, pressuring equity valuations; the S&P 500 fell with Nvidia and Micron leading declines, while Apple gained after unveiling its $1,999 iPhone.

U.S. producer prices rose 0.4% month over month in August, matching expectations, while the year-over-year increase came in at 5.4%, slightly above forecasts. Core PPI, which excludes food and energy, increased 0.2% on the month, below expectations, and core less trade services rose 0.3%. Energy costs climbed sharply, with diesel prices surging 24.1% and lifting the overall index.

US producer prices rose 5.4% in August from a year earlier, up from 4.8% in July, while the index increased 0.4% from July to August. Oil prices climbed above $100 a barrel amid renewed fighting in the Middle East, and regular gasoline has surged 44% since late February, according to AAA data. Core producer prices, excluding food and energy, rose 0.2% over the month, adding to questions about how sticky inflation could factor into the Federal Reserve’s next rate decision.

August U.S. producer price data and a jump in oil prices renewed inflation concerns, with markets pricing a 70% chance the Federal Reserve raises rates next week. Brent crude rose 6% to $107 a barrel after key supply routes through the Strait of Hormuz and the Red Sea were disrupted by the U.S.-Israeli war on Iran. The S&P 500 fell 0.59% and the Nasdaq slid 0.59%. The S&P 500 is down nearly 3% from its Aug. 13 record close but remains up 11% in 2026.

Australia’s headline inflation eased slightly to 3.5% in July, but it remains well above the Reserve Bank of Australia’s 2–3% target band. Core inflation, measured by the trimmed mean, held at 3.6% and was also higher than forecasts. RBA officials have reiterated the need to return inflation to the target range, lifting market expectations of a fourth rate rise later this month. If the cash rate is lifted again, it could reach a 15-year high.

U.S. Treasury Secretary Scott Bessent sought to cool what he called market “fever,” but a Treasury announcement to repurchase $6 billion of 10- to 20-year government bonds instead coincided with a jump in yields. The 10-year yield climbed to 4.85%, its highest since November 2023, while the 20- and 30-year yields rose to 5.3%. Stocks slipped at midday, with the Nasdaq Composite down 0.8% and the S&P 500 off 0.6%. Investors have also been focused on concerns that the Iran conflict and President Donald Trump’s trade policies could lift inflation, as U.S. national debt has surpassed $40 trillion.

All four of Australia’s major banks are now warning another interest-rate increase is possible, after Westpac shifted position on Tuesday and set a 4.60% cash-rate target as its base case. Overnight trading was volatile, with cash-rate futures pricing a 60% chance of a 25-basis-point move by the Reserve Bank of Australia on September 29. The ASX rate tracker also moved to reflect a potential increase within three weeks. The shift follows inflation holding at 3.6% and economic growth coming in stronger than expected.

Bank of England Governor Andrew Bailey told lawmakers on Tuesday that a rate increase is not inevitable and that policy decisions will depend on economic and geopolitical developments. He said markets have built in a risk premium that implies more tightening than the most likely policy path, reflecting concerns about higher energy prices, according to Reuters. Bailey and three other Monetary Policy Committee members largely reiterated their existing views ahead of the BoE’s Sept. 17 rate announcement. Market pricing points to a 25-basis-point hike by year-end and two additional increases before 2027.

Reserve Bank of Australia Deputy Governor Andrew Hauser said the public is angry about elevated inflation and warned interest rates could rise further if price pressures remain high. The cash rate is currently 4.35%, and headline inflation rose to 3.5% in the year to July. The RBA projects inflation will not return to its target range until early 2028. The central bank’s board is scheduled to meet at the end of September to decide whether to hold or move rates.