US rate expectations shift ahead of key inflation data

US markets were closed on Monday for Labour Day, leaving trading activity subdued as investors turned their attention to this week’s US inflation data and the outlook for Federal Reserve (Fed) policy. The dollar weakened sharply against the yen though, falling 1.20% to 154.32 after the Japanese currency climbed to a seven-month high as expectations of further Bank of Japan (BoJ) tightening and fund repatriation strengthened.

The US inflation report due on Friday (11 September 2026) will be closely watched after stronger-than-expected August employment data increased expectations of a September rate hike. Markets are pricing a 58% chance of a Fed hike at its 16 September meeting, while elsewhere the European Central Bank is widely expected to raise rates by 25-basis-points (bps) to 2.50% on Thursday. Markets are also pricing a 75% probability of a 25bps BoJ hike on 18 September.

Brent crude rose 1% to $97.24 per barrel as renewed conflict in the Middle East heightened concerns around energy supply. Tehran said it would announce a restricted zone outside the Strait of Hormuz after US forces struck three Iranian tankers and Iran’s Islamic Revolutionary Guard Corps launched ballistic missiles at two US Navy ships. Gold fell 0.78% to $4 393.05 per ounce, while silver and platinum declined 0.90% and 0.33%, respectively.

European equities were mixed as investors assessed the impact of higher interest rates, rising energy prices and political uncertainty. The Euro STOXX 50 gained 0.10% to 6 399, while the STOXX Europe 600 was unchanged at 649.80. The DAX 40 fell 0.20% to 26 006.5, while the CAC 40 rose 0.30% to 8 306. Technology stocks provided support, with Infineon and STMicroelectronics among the strongest performers. The FTSE 100 edged lower, weighed down by weaker consumer stocks, with Unilever and BAT declining 1.40% and 1%, respectively.

Asian markets were mixed, with technology stocks and renewed optimism around artificial intelligence leading gains. Japan’s Nikkei 225 rose 2.12% to 66 400, while the broader Topix gained 0.55%. The Hang Seng Index fell 0.90%, retreating from a two-week high in the previous session, while China’s Shanghai Composite was little changed.

South African equities ended higher, with the FTSE/JSE All Share Index gaining 0.23% to 116 988.96. Resources rose 1.77% and Metals and Mining gained 1.90%, while Industrials and Financials declined. At 14h10, the rand weakened 0.17% against the dollar to R15.99, 0.27% against the pound to R21.64 and 0.25% against the euro to R18.59.