TMGM Daily Market Breakfast: 12 September 2026

Morning Snapshot

• U.S. August CPI showed headline inflation unchanged at 3.4% year-on-year, monthly CPI at 0.4%, core CPI at 0.3% month-on-month and 2.4% year-on-year, keeping next week’s Federal Reserve decision in sharp focus.
• U.S. Treasury yields eased after the CPI release, but the 10-year yield still stood at 4.951% and remained more than 16 basis points higher on the week.
• The U.S. Dollar Index retreated from its post-CPI high and closed the week near the 99.00 area as lower long-dated Treasury yields offset support from firmer U.S. inflation readings.
• The European Central Bank raised its three key rates by 25 basis points on 10 September, lifting the deposit rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending rate to 2.90%, while maintaining a hawkish tone on inflation.
• Bank of Japan tightening expectations strengthened ahead of next week’s meeting, with Reuters reporting the central bank is set to raise rates, most likely by 25 basis points, to 1.25%.
• UK GDP rose 0.4% month-on-month in July after a 0.3% increase in June, beating expectations for a flat reading.
• Oil remained volatile as Middle East supply risks kept Brent near $110 a barrel earlier in the session, while WTI later traded near $97 after reports that Iran and Gulf states would meet on a temporary Strait of Hormuz shipping arrangement.
• Asian stocks fell sharply, tracking Wall Street losses as higher energy prices and a global bond selloff weighed on risk sentiment.

Market Developments

Rates & U.S. Dollar

The U.S. 10-year Treasury yield eased 1 basis point to 4.951% after the CPI release but was still up more than 16 basis points on the week, while the U.S. Dollar Index gave back earlier gains and finished near the 99.00 zone.

Foreign Exchange

USD/JPY fell 0.54% to around 153.60 after briefly rising to 154.49 following the U.S. inflation release, while EUR/USD steadied after an initial post-CPI drop and EUR/USD-related reporting placed the pair around 1.1600 after the ECB’s hawkish rate increase.

Commodities

Brent rose more than 6% in the previous session and neared $110 a barrel in early trading, while WTI later traded around $98.50 to $97.00 and was down roughly 3.4% on the day as traders reacted to volatile Middle East supply headlines and reports of talks on Strait of Hormuz shipping.

Asian Equities

Asian stocks declined sharply on Friday, following Wall Street lower as surging oil prices and the global bond selloff reinforced a broader risk-off move.

Macroeconomics & Central Banks

U.S. Inflation Keeps Federal Reserve Decision in Focus

U.S. consumer inflation data for August delivered a mixed but still firm signal ahead of next week’s Federal Reserve meeting. The Bureau of Labor Statistics reported headline CPI at 3.4% year-on-year, unchanged from July and in line with expectations, while monthly CPI accelerated to 0.4% from 0.1% previously. Core CPI, which excludes food and energy, rose 0.3% on the month, above the 0.2% forecast, while the annual core rate eased to 2.4% from 2.5%.

Energy remained a key part of the inflation picture. Gasoline accounted for more than one-third of the monthly increase in headline CPI, while earlier producer-price data had already reinforced concern that pipeline inflation pressures were not fully fading. MUFG noted that firmer PPI components feeding into the PCE deflator, including healthcare costs and airfares, had added to expectations that the Fed could begin hiking rates next week.

The market reaction was initially supportive for the dollar, but that move faded as Treasury yields pulled back from their highs. Even so, the inflation data left monetary policy expectations elevated heading into a week dominated by the Fed, the Bank of England and the Bank of Japan.

Treasury Yields Ease After CPI but Finish the Week Higher

U.S. Treasury yields fell back during the North American session after the CPI release, but the broader weekly move remained higher as investors continued to price a firmer Federal Reserve stance. The 10-year Treasury yield was down 1 basis point at 4.951%, yet still more than 16 basis points higher on the week, a gain of about 3.49%.

The pullback in longer-dated yields also helped unwind some of the dollar’s immediate post-CPI strength. The U.S. Dollar Index retreated from its session high and ended the week near the 99.00 area, holding onto most of the recovery seen after Thursday’s inflation-related wobble but failing to extend decisively.

ECB Delivers 25 Basis Point Hike and Signals Inflation Risks Remain Elevated

The European Central Bank raised its three key policy rates by 25 basis points at its 10 September meeting, taking the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending facility rate to 2.90%.

President Christine Lagarde described the decision as unanimous and a “no brainer”, while the ECB said inflation was set to remain well above target for an extended period. Policymakers also highlighted that the Middle East conflict continued to generate inflationary pressure, with risks tilted to the upside for inflation and to the downside for growth.

Updated projections pointed to higher baseline inflation in later years, while growth forecasts for 2026 and 2027 were revised higher in some reporting. Several accounts of the decision said the tone left the door open to further tightening, even as the ECB maintained its data-dependent and meeting-by-meeting approach. Market and analyst commentary in the reporting period broadly converged on December as the next key meeting, with October also described as live.

Bank of Japan Rate-Hike Expectations Build Ahead of Next Week’s Meeting

Expectations for a Bank of Japan rate increase strengthened further ahead of next week’s policy meeting. Reuters reported that sources said the BoJ is set to raise interest rates, most likely by 25 basis points, at the 17-18 September meeting, which would lift the policy rate to 1.25%.

Other reporting during the session also pointed to a 25 basis point move as the central case. Analysts cited persistent price pressures, stronger wages and solid economic activity, including final second-quarter GDP growth of 1.4% quarter-on-quarter saar and 0.9% year-on-year. Several reports said policymakers were likely to retain a cautious tone on the pace of further tightening, mindful of market sensitivity to policy surprises.

The yen strengthened as those expectations firmed. USD/JPY fell 0.54% to around 153.60 after briefly jumping to 154.49 following the U.S. CPI release. Reporting during the session also noted that a move to 1.25% would take Japanese borrowing costs to their highest level in 31 years.

UK Economy Expands Faster Than Expected in July

The UK economy grew 0.4% month-on-month in July, beating expectations for no growth and following a 0.3% increase in June, according to Office for National Statistics data released on Friday.

The stronger reading supported sterling during the session and added to the run of major macro releases shaping next week’s Bank of England decision. Market coverage during the reporting period focused on the upside surprise in monthly activity and its contrast with softer expectations going into the release.

Geopolitics, Energy & Commodities

Hormuz Shipping Talks Trigger Oil Pullback but Middle East Supply Risks Persist

Oil prices remained highly volatile as traders weighed severe Middle East supply risks against signs of possible progress on shipping through the Strait of Hormuz. The Financial Times reported that Iran and Gulf states were set to meet to secure support for a temporary arrangement to manage shipping through the waterway.

That headline helped drive a pullback in crude later in the session. WTI traded around $97.00 and was down about 3.4%, putting it on track for its first down day in five sessions, after earlier reports had placed it near $98.50. The move followed a sharp prior rally in which Brent settled more than 6% higher and neared $110 a barrel in early trading.

Despite the retreat, the broader supply backdrop remained tight. Reporting during the session cited Houthi advances near the Bab el-Mandeb Strait, rising risks to Saudi energy infrastructure and Red Sea exports, and Saudi Arabia’s August oil production at 6.24 million barrels per day, the lowest level since the 1990s. The International Energy Agency was also cited as saying global oil markets tightened sharply in August, with global production down 1.6 million barrels month-on-month to 100.1 million barrels per day and more than 10 million barrels per day of Gulf output still shut in.

Asian Stocks Slide as Oil Shock and Bond Selloff Weigh on Sentiment

Asian equities fell sharply on Friday, following Wall Street lower as surging energy prices and a global bond selloff reinforced a broader risk-off tone.

The decline came as investors absorbed higher oil prices, firmer U.S. inflation signals and stronger expectations of further tightening from major central banks, particularly the Federal Reserve and the Bank of Japan.

Upcoming Key Events

• Federal Reserve Policy Decision — null: Next week’s Federal Reserve meeting is a central focus after August CPI and PPI data reinforced expectations of a possible rate increase.
• Bank of England Policy Decision — null: The Bank of England is due next week, with UK July GDP surprising to the upside ahead of the decision.
• Bank of Japan Policy Meeting — null: The Bank of Japan meets on 17-18 September, with multiple reports pointing to a likely 25 basis point rate increase to 1.25%.
• Japan August Inflation Data — null: Japan is due to release August inflation data ahead of the Bank of Japan decision, with one report citing consensus for headline inflation at 2.0% year-on-year and core inflation at 1.8%.