The euro rose against a broadly weaker dollar on Monday, supported by short-covering after Friday's outsized decline, month-end flows, softness in U.S. equities, and expectations that the European Central Bank will raise interest rates next week.

Treasury Secretary Scott Bessent believes the Japanese government and BOJ will take steps to strengthen the yen and hinted at information not yet reflected in markets.

Bessent also said he will meet Canada's finance minister at the G20 and said he had a "very robust" meeting with China's central bank governor, Pan Gongsheng.

Federal Reserve Chairman Kevin Warsh said a global investment surge is replacing the savings glut, supporting growth and capital spending.

Vice President JD Vance said Trump's social media post on Kharg Island was intended as a message to Iran, after President Donald Trump vowed further strikes.

German inflation accelerated less than expected in August to 2.9% year-on-year, preliminary data from the federal statistics office showed on Monday.

DXY is pulling back after Friday's dollar surge stalled at the 100-DMA near 99.70, with reversal signals suggesting fading momentum but little conviction toward either a bullish or bearish directional bias.

EUR/USD firmed on month-end dollar selling and short-covering, but lower highs, large 1.16-1.7 expiries this week and resistance at the 200-DMA of 1.1633 keep the outlook cautious, unless it clears the 1.1710-11 August double top.

GBP/USD held a modest gain above its 21-DMA of 1.3540, despite rising U.S. yields, with a break above the day's high of 1.3565 potentially targeting 1.36 ahead of the key U.S. payrolls on Friday.

AUD/USD edged up as stronger commodity prices and expectations for further RBA tightening offset rising U.S. yields, with a break above 0.7170 strengthening a bullish case.

USD/JPY remained capped below 160 as softer dollar sentiment and intervention concerns offset support from higher Treasury yields and oil, though the bias stays constructive above 159.

Treasury yields rose as much as 4 basis points as the curve steepened. The 2s-10s curve was up about 3 basis points to +40.2bp.

The S&P 500 fell 0.45%.

WTI oil rose 2.8% amid rising US-Iran tensions.

Gold fell 0.5% while copper gained 0.2%.

Heading toward the close: EUR/USD +0.28%, USD/JPY -0.13%, GBP/USD +0.06%, AUD/USD +0.10%, DXY -0.28%, EUR/JPY +0.10%, GBP/JPY -0.09%, AUD/JPY -0.14%.(Editing by Burton Frierson Robert Fullem is a Reuters market analyst. The views expressed are his own)

• GBP$ up a touch NY afternoon trade, +0.08% at 1.3549; NorAm range 1.3565-1.3540

• Long-end UST yields lead higher hold little sway over GBP$ in either direction

• LSEG's WS indicating UK 10-yr gilts on the rise, may have fiscal implications going forward

• IRPR- BoE on hold in Sept, +27bp by Dec MPC meet; Fed 64% odds for Sept hike, +37bp by Dec

• End-of summer liquidity light into month-end; US payrolls Sept 4, mid-Sept US, UK CPI in focus

• GBP$ supt 1.3530 Friday/Monday low area, 1.3488 rising 30-DMA, 1.3440 200-DMA

• Res 1.3564 Monday high, 1.3598 the 10-DMA, 1.3648 daily high Aug 26

GBP$ Chart:

(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

Morgan Stanley Research discusses its Fed rate outlook after Fed Warsh's remarks at Jackson Hole.

"Our economists expect that the data releases between now and the September FOMC meeting will meet the bar that Chairman Warsh laid out: that underlying inflation is moving to the Fed's 2% objective, clearly and at sufficient speed. As a result, we don't think the Fed will hike rates in September, which should lower front-end US yields relative to yields abroad since roughly +15bp are currently priced for the September FOMC meeting," MS notes.

"Therefore, we think the USD can decline broadly in line with front-end US yields, given the broad relationship between the USD and front-end yield differentials so far this year," MS adds.

USD/JPY remains pinned below 160 after U.S. Treasury Secretary Scott Bessent said he expects Japanese government and Bank of Japan policies to support a stronger yen, adding that he is aware of information not yet reflected in markets.

Markets are likely to expect this to mean the Takaichi administration's pro-growth agenda and higher BOJ rates, though a stronger yen may be difficult to achieve given the BOJ's slow normalization pace and growth that has largely accompanied yen weakness.

Bessent's comments may hint at the timing of intervention or other measures that could help keep USD/JPY near or below the key 160 level and prevent a return toward 164. Markets are also awaiting comments from Japanese officials at the G20.

There remains optimism that long-yen positions will eventually be rewarded as investors anticipate a faster BOJ tightening cycle and government policies that support a recovery in the undervalued currency. Options markets are less convinced, suggesting any yen recovery is more likely against the euro than the dollar if U.S. inflation remains elevated. Focus is squarely on next week's CPI report and mid-September policy meetings.

To shift momentum decisively in favor of USD/JPY bears, the pair would need to close below its 21-day moving average at 158.95 and 200-day moving average at 158.43. A break below a rising channel from the post-intervention low at 155.20 opens the door for further losses. By contrast, a close an upper Bollinger at 160.34 helps build the bull case.
Yen

(Robert Fullem is a Reuters market analyst. The views expressed are his own)

ANZ Research previews this week's September RBNZ policy meeting.

"We expect the RBNZ to deliver a 25bp hike at its meeting this week, taking the OCR rate to 2.75%. OIS markets have assigned above a 90% chance of a hike next week, so the key takeaway from the MPS will be expectations of the timing and extent of future tightening. Markets are only pricing in around a 50% probability of a hike in October. A hawkish surprise will likely firm up October pricing, which we think will only provide limited upside to the NZD, considering it would be bringing forward some the hike fully priced by OIS for the December meeting," ANZ notes.

"On the OCR track, we expect a similar track to that published in May would leave optionality open around the October meeting and have little impact on FX. In May, the RBNZ’s OCR track peaked at 3.28% in Q2 2029 and implied an average OCR of 3.1% over the two years ending Q3 2028. OIS are reflecting a rate of around 3.5% in August next year, which we think is stretched. Any indication of a softer OCR terminal rate would weigh on the NZD, potentially seeing the NZD approach key support near 0.586–0.587. Upside risks look less pronounced. Overall, we are mildly negative the NZD into the RBNZ meeting,' ANZ adds.

Sterling looks vulnerable to a near-term drift lower as it consolidates below 1.36, with bulls paring recent longs while liquidity thins ahead of end-of-summer holidays and markets adjust to a more hawkish Fed narrative following Chair Kevin Warsh's Jackson Hole debut.

In the immediate term, however, the seasonal dearth of liquidity may cushion sterling, as entrenched shorts trim exposure rather than risk being chopped up in illiquid conditions. GBP/USD shorts have been cut by nearly 20% over the past three weeks, with the pound rallying off late-July lows near 1.3275 as a dovish Fed lean — after the recent rate hold and softer U.S. data — took hold. Those dovish tones have cooled markedly in the run-up to, and after, Warsh's Friday's speech, which was interpreted as hawkish and nudging rate expectations higher, to sterling bulls' detriment.

Beyond the Fed noise, other rate stimuli tilt hawkish. With the U.S.–Iran Memorandum of Understanding an increasingly distant memory, oil's climb from near $60/bbl into the $80s risks prolonging global inflation and stoking second-round effects; weekend U.S.–Iran hostilities have lifted crude further, reinforcing high-for-longer fears. Short-term futures suggest the Fed and BoE stay on parallel paths through 2026. Further out, the post-Warsh rise in the 3-month SOFR strip may stall GBP/USD gains as U.S.–UK rates converge.

With central bankers noting the data will be decisive, markets will be looking ahead to U.S. payroll data on September 4, followed by U.S and UK CPI data on September 11 and 16 respectively for clues to Fed and BoE policy paths heading into year-end.
GBP Chart:

(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Goldman Sachs Research discusses the USD outlook.

"A number of reasons have contributed to the Dollar's tough summer with policy volatility being a common factor. First, small but unusual US interventions in the Yen and Treasury markets have shown a clear revealed preference for supporting other assets, even at the cost of Dollar weakness," GS notes.

Second, beyond that signal, and each individual action, this greater willingness to resort to unconventional choices raises questions about whether other even more extreme choices that come at the expense of the Dollar could be considered, especially if other harder choices on fiscal and monetary tightening are avoided.

And third, the opacity of the Fed reaction function, against a backdrop where inflation data has been a touch more quiescent, has added to near-term pressures on the Dollar," GS adds.

• EUR/USD rebounds at month-end after its worst daily loss in more than two months

• Hawkish Fed repricing after Chair Warsh Friday and higher oil keeps bears in control

• Nearby support seen at the Aug. 19 low of 1.1568 and the 100-DMA at 1.1570

• Large option expiries between 1.1600 and 1.1700 may cap any rebound on Monday

• Techs lean bearish due to series of lower highs and position below the 5-DMA

• A break below 1.1550-60 would expose the 1.1500 level

• Resistance is at 1.1660, ahead of the 1.1710-11 August double top
EUR

(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

• GBP/USD close above 1.3477 to complete back-to-back monthly gains

• Fits with risk of a second monthly loss for the dollar index

• Initial sterling support at 1.3527, Friday's low

• Fibo level at 1.3521, 38.2% of 1.327401.3674

• Fed rate hike bets in the mix following Warsh hawkish undertones

• Some dollar demand as ME tensions flare but market generally tight

• Sterling activity thin with London observing a Monday holiday
GBP/USD daily chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• JPY leads G10 to open the week, Bessent flags recent yen moves as pretty well contained

• Speculation of a G20-side meeting between JP officials and U.S. Treasury Sec Besset adds to yen bid

• USD/JPY back at pre-Warsh levels after stalling above 160

• Upside still looks capped, despite no clear sustained pullback signal

• Warsh's hawkish remarks injects more two-way risk into USD/JPY

• Given the hawkish repricing in U.S. rates, downside U.S. data surprises can hit harder

• Support: 159.17-36 (200-hour MA cluster), then 158.00

• Resistance: 160.20 (weekly high), then 160.81 (July 31 high)
USDJPY hourly chart

Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Thin market with London out: Fed spec and ME tension the drivers

• AUD holding a small bid despite risk jitters: AUD/USD up 0.01% at 0.7159

• Friday's 0.7208 high initial resistance: break needed to keep bull run alive

• Support at the 10-DMA, 0.7149: risk of a return to the 100-DMA, 0.7077

• Warsh comments lift September rate-hike bets but dollar broadly softer Monday

• Fed may need to hike rates if above-target inflation persists

• Markets price in about a 60% chance of a September rate hike

• Trump says Iran's Kharg is being 'blown to smithereens', but gives no details
AUD/USD daily chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• EUR/USD flat in holiday-thinned trade, firmer oil adds to euro headwinds

• Oil jumps more than 2% on U.S.-Iran tit-for-tat strikes , keeping EU gas prices near YTD highs

• Through the terms-of-trade channel, rising energy costs increase downside risks for EUR

• Fed Sept hike odds now around 60% , supporting USD bid

• Near-term support at 1.1550-60, break would open up 1.1500

• Resistance at 1.1600-05, then 1.1630-50
EURUSD hourly chart

Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Aug 31 (Reuters) - Foreign exchange option expiries for the New York cut at 10.00 a.m New York (1500 GMT) can, under certain conditions have an impact on currency spot prices.

For Monday's EUR/USD expiries there are strikes totalling EUR10.45 billion between 1.1600 and 1.1690. These deals are likely to impact the spot price.

Gamma hedging is a major driver when traders who are short of options often hedge their exposure in spot. As spot moves closer to key strikes near the expiry time, hedging flows can increase and become one-sided (buying if market is below a big strike, selling if above), which can influence spot.

Market conditions that can heavily influence the impact of option expiries include the following. The notional size of the expiry if large relative to typical market liquidity in that pair and the time of day. Strikes that are near the current spot (at or very near-the-money into the cut), especially if there are several clustered strikes. If dealer positioning is skewed (the street is generally short gamma), so many players need to hedge in the same direction and if liquidity is thinner (e.g., around data, holidays, or in less-liquid currency crosses), so hedging flows have a greater impact.

Spot traders will look for patterns that can appear ahead of option expiries.

Magnet effect: If there's a large expiry, at or very near spot, the price sometimes gravitates toward that strike into the cut as hedgers adjust.

Volatility spike / mean reversion: Short-gamma hedgers may buy high and sell low as spot moves, which can add noise and short-term volatility. Long-gamma players can have the opposite, dampening effect.

Fade after the cut: Once the options expire and hedging flows stop, the market can "relax", and any artificial pressure around a strike may fade.

Option expiries, if strikes are large can impact spot but not always, and usually only when certain conditions are met.

EUR/USD option expiries for Monday's New York cut, August 31
EUR/USD option expiries:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10-am New York/1400 GMT on Monday 31 August

• EUR/USD: 1.1450-60 (310M), 1.1500-05 (420M), 1.1550-60 (574M)

• 1.1600-10 (4.0BLN), 1.1615-25 (1.83BLN), 1.1650-60 (1.2BLN)

• 1.1665-75 (2.22BLN), 1.1680-90 (1.2BLN)

• USD/JPY: 159.00 (2.1BLN), 159.35-40 (273M), 159.50 (620M)

• 159.65-70 (2.7BLN), 160.00 (306M), 161.00 (953M). EUR/JPY: 184.87 (200M)

• USD/CHF: 0.8090 (236M), 0.810 (356M). EUR/CHF: 0.9375 (408M)

• 0.9380 (227M)

• GBP/USD: 1.3445-50 (457M), 1.3530 (257M)

• AUD/USD: 0.7045-50 (447M), 0.7120-25 (709M), 0.7140-50 (491M)

• 0.7210-20 (381M),

• USD/CAD: 1.4050 (207M)(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• AUD/USD +0.15% in Asia as broader USD index fades from Fri 92.72 highs

• Trump claims Kharg Island under attack, clarification not yet forthcoming

• Iran targets U.S. bases in Jordan, retaliating for strikes on Larak Island

• Fed Chair Warsh says more work to be done on inflation, firms Fed hike bets

• AUD needs break of 0.7210 to resume uptrend, may slip toward 0.7102 21-DMA

• AUD Q2 current account due Tue, Q2 real GDP due Wed (poll +0.3% q/q)

• Range Asia 0.71515-705 support 0.6920 0.6866, resistance 0.7210 0.7282
DXY Daily 55-DMA


AUD Daily 21/55/100-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• Australian gold stocks fall as much as 4.7%, their biggest intraday pct loss since July 24

• Sub-index hits its lowest level since Aug 20

• Gold prices fell more than 3% on Friday after U.S. Federal Reserve Chair Kevin Warsh's signalled interest rate that hikes may be needed [GOL/]

• Shares of Northern Star Resources and Evolution Mining fall 4.1% and 4.3%, respectively

• Seperately, NST said Deputy CEO Ryan Gurner will leave the gold miner

• YTD, AXGD up 4.2%

(Reporting by Nichiket Sunil in Bengaluru)

• AUD/USD +0.1% Mon as DXY softens slightly from Fri's Warsh induced highs

• Iran targets bases in Jordan, retaliating for U.S. attacks on Larak Island

• Firming Fed rate hike bets likely to prevent USD from bigger downside swing

• AUD needs break of 0.7210 to resume uptrend, may slip toward 0.7101 21-DMA

• AUD Q2 current account due Tue, Q2 real GDP due Wed (poll +0.3% q/q)

• Range Asia 0.71515-641 support 0.6920 0.6866, resistance 0.7210 0.7282
AUD Daily 21/100/200-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• A more hawkish than thought FOMC Chair Warsh at Jackson Hole, Fed Sept hike?

• Any September Fed hike would deem a BOJ hike neutral

• JGB-US rate diffs little changed however, 2s @252, 10s 174 bps, tad lower

• USD up across the board, USD/JPY to 160 handle, Asia so far 160.05-20 EBS

• Middle East conflict re-flaring too, USD supportive too

• Technically, USD/JPY still below 161.14-162.59 ascending daily Ichi cloud

• Cloud to plunge going forward however, to 159.59 towards weekend

• Spot for now in area of flat 100-DMA at 160.00, recently seen range top

• Japanese exporter sales likely good early as has been recent pattern

• Support likely from area of hourly Ichimoku tenkan currently at 159.77

• Intervention possibility but seen small on Bessent talk

• Bessent doesn't see yen moves as "disorderly", moves "pretty contained"

• G20 coming up but maybe no help from US on intervention front now

• Fibo 61.8% retracement of 163.99 to 155.20 July 28 to August 3 at 160.63

• Option expiries today 159.50-70 $3.3 bln, some at 160.00, 161.00 $953 mln

• IMM CTAs look to have upped yen shorts in latest reporting week

• Related comments , , , also

• US markets , , ,

• On Bessent-talk , , Warsh ,
USD/JPY:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• Bitcoin tumbles to $77,066 in Asia Monday, tipping lower

• Falls out of Bollinger uptrend channel, below Fibo $78,774

• Bullish indicators nullified, long capitulation to ensue

• Nearest chart support is 21 DMA, substantially lower at $71,894

• USD recovery inspired by Fed's Warsh weighs on crypto

• Warsh signals rate tightening to address inflation
BTC

(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

• AUD/USD -0.7% from Fri 0.7208 high in aftermath of Fed Chair Warsh speech

• Warsh asserts retention of 2% inflation target, says more work to be done

• Broad USD index & UST yields higher on firming Fed rate hike bets

• AUD fails to consolidate break above 0.7200, reforms resistance 0.7210

• Futures imply 56.1% probability of Sep RBA hike, will lend AUD support

• AUD Q2 current account due Tue, Q2 real GDP due Wed (poll +0.3% q/q)

• Range early Asia 0.71515-62 support 0.6920 0.6866, resistance 0.7210 0.7282
AUD Hourly Bollinger Study & DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD net spec G10 long pared by $7.93bn in Aug 18-25 IMM period; $IDX -0.74% in period

• Today's post-Warsh USD rise likely moots data as Fed narrative flips to less-dovish

• EUR$ +0.86% in period; specs +22.7k contracts now -36.4k; ECB hawkish, Fed dovish in period

• $JPY -0.24%; specs -10.4k contracts now -63.3k; questions around BoJ policy USD supportive

• GBP$ +0.89%; specs +10k contracts now -44.5k; again dovish Fed view weighed on USD

• $CAD -0.36%; specs +36.6k contracts now -122k; rate convergence early in period lifted CAD

• CAD short still significant, likely added to after hawkish Warsh; keep focused on glbl inflation

• AUD$ +1.13%; specs -296 contracts now -44.5k; higher terminal RBA policy tack supports AUD

IMM Position Table as of Aug 25:


Majors w/IMM Performance Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

(Fed hike odds updated)

• EUR/USD slipped back to retest 1.16 post-Warsh

• Inflation fight not over message lifted Fed hike bets

• Sept hike odds now around 56%, but outcome remains depend on data/oil dependent

• Spot back at pre-Treasury buyback level (1.1603), a break below leaves EUR vulnerable to deeper retracement

• Next downside objective would be last week's low at 1.1557 on a 1.1600 break
EURUSD hourly chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own) ((Email: ))

ING Research previews next week's RBNZ policy meeting.

"We expect the Reserve Bank of New Zealand to increase its overnight cash rate (OCR) by 25bp to 2.75% on 2 September. When rates were last hiked in July, the RBNZ said that “some further reduction in monetary stimulus is likely to be required”. In its May projections, based on higher oil price assumptions, signalled rates could reach 3.0% by year-end and remain there throughout 2027.

Markets are currently matching those projections for 2026, but are even more hawkish for 2027, despite lower energy prices. A September hike is fully priced, with another expected by year-end. Beyond that, the OIS curve implies a further 50bp of tightening, taking rates to 3.50% by mid-2027," ING notes.

"Against this backdrop, we see scope for dovish risks heading into the meeting. The bar for the RBNZ to validate the market's aggressive tightening expectations appears high.For FX, we see downside risks for the NZD around this meeting, given the high hurdle for the RBNZ to validate market pricing," ING adds.

USD/JPY bulls remained in command after Fed Governor Kevin Warsh struck an upbeat tone on the U.S. economy and warned that inflation has remained elevated for too long.

The pair climbed to a post-intervention high above 160 amid broad-based dollar strength, extending a bull channel from the intervention low near 155.20.

Further gains are possible if investors rebuild dollar longs and yen shorts after August's position trimming. Weekly CFTC data show leveraged funds have begun cautiously adding short-yen exposure as volatility declines. However, yen futures open interest has dropped to its lowest level since April, suggesting bearish conviction remains limited.

Intervention concerns could re-emerge if USD/JPY remains above the 160 psychological level and approaches its 160.34 upper Bollinger and 160.63 cloud bottom as upward momentum builds.

For now, however, option convexity sees only modest intervention risk despite next week's G20 meeting involving Japan Finance Minister Satsuki Katayama, U.S. Treasury Secretary Scott Bessent and BOJ Governor Kazuo Ueda.

While past intervention episodes have often coincided with major policy events such as the G20, the yen may be more focused on equity performance and upcoming U.S. payrolls and CPI reports, along with mid-September Fed and BOJ meetings. On the downside, a break below 159.60, followed by the 21-day moving average at 158.84, would temper the bullish outlook with a close below a flat 200-day moving average at 158.41 inviting bears.
Yen


(Robert Fullem is a Reuters market analyst. The views expressed are his own.)