Oil prices dominate the market, and the dollar's upward trend continues.
2026-09-18 17:56:09
On Friday (September 18), the US dollar continued its upward trend during the European session, while the Federal Reserve's hawkish stance constrained the currency market; oil prices remained high; unexpected news risks influenced market risk appetite; the Bank of Japan's hawkish rate hike failed to satisfy yen investors, causing the dollar to rise against the yen; and the stock market rebounded, boosted by falling oil prices and declining sovereign bond yields. 
The US dollar's upward trend continues. Less than 48 hours after the Federal Reserve's interest rate meeting concluded, Chairman Warsh's hawkish remarks and aggressive dot plot forecasts continue to reverberate in the foreign exchange market. The euro traded around 1.1480 against the dollar, down about 1% this week; the Bank of England's rate decision fell short of expectations, with the pound hovering around 1.3364 against the dollar. Several central banks have released signals this week, with Reserve Bank of Australia Governor Bullock also delivering a hawkish speech earlier today, essentially confirming the market's priced-in September 29th rate hike. This round of global central banks collectively turning hawkish was triggered by rising oil prices, a scenario very similar to the market after the COVID-19 pandemic. Some major US investment banks have already moved up their expectations for a Fed rate hike to October. The market is betting on a 50% probability of consecutive Fed rate hikes, essentially betting on continued oil price increases. Oil prices will determine the next policy move for major central banks. WTI crude oil spot prices have retreated from this week's high but remain relatively high around $100. The US, which had previously maintained a wait-and-see attitude towards the Middle East, has now significantly increased its diplomatic activities in this area. President Trump will meet with Gulf leaders next week. Reports indicate that China has called on Iran to mediate and reopen the Bab el-Mandeb Strait to curb the Houthi attacks (primarily targeting Saudi Arabia). Oman has also joined negotiations with the rebels. Negotiations and closed-door consultations typically signify a peaceful resolution to the conflict, but this time the situation may be different. Trump reportedly needs to make a "major decision" regarding the direction of the US-Iran conflict, with options including more aggressive military action targeting power plants and oil facilities. With only 46 days until the crucial US midterm elections, military action could cause oil prices to surge again, severely impacting Republican hopes of retaining control of Congress. Even before a new round of oil price increases has begun, the latest forecasts show an increasing probability of Democrats winning a majority in both the House and Senate. A US-Iran agreement, restoring oil transport through the Strait of Hormuz and the Bab el-Mandeb Strait, would be welcomed by investors and central banks worldwide. Next week's economic data calendar is relatively light; therefore, unexpected geopolitical developments in the Middle East will be the main source of market volatility. The Bank of Japan raised interest rates, but yen investors were greatly disappointed. The Bank of Japan raised interest rates by 25 basis points as expected, in line with market expectations. Despite a hawkish statement from the central bank, and Governor Kazuo Ueda's mention of increasingly aggressive corporate wage and pricing behavior, posing a risk of core inflation exceeding the 2% target, this stance failed to reassure the market. Newly appointed board members Asada and Sato voted against the rate hike, damaging market confidence and pushing the dollar higher against the yen. The exchange rate is currently around 156.74, having recovered half of its losses from early September and rising nearly 3% from the September 8 low of 152.88. The stock market downplayed the impact of the Fed's rate hike. The dollar performed strongly, but the impact of the Fed's rate hike on US stocks quickly faded. The S&P 500 and Nasdaq 100 closed sharply higher on Thursday, and stock index futures indicate a continued positive opening today. The decline in oil prices and sovereign bond yields on Thursday were the core drivers of the stock market rebound. It can be seen that the stock market is not afraid of the Fed's aggressive rate hike cycle, but is extremely concerned about weakening US economic growth momentum. Amid a tightening labor market and persistently rising prices, economic growth will be hampered, and may even reduce the amount of money companies invest in artificial intelligence.
The US dollar's upward trend continues. Less than 48 hours after the Federal Reserve's interest rate meeting concluded, Chairman Warsh's hawkish remarks and aggressive dot plot forecasts continue to reverberate in the foreign exchange market. The euro traded around 1.1480 against the dollar, down about 1% this week; the Bank of England's rate decision fell short of expectations, with the pound hovering around 1.3364 against the dollar. Several central banks have released signals this week, with Reserve Bank of Australia Governor Bullock also delivering a hawkish speech earlier today, essentially confirming the market's priced-in September 29th rate hike. This round of global central banks collectively turning hawkish was triggered by rising oil prices, a scenario very similar to the market after the COVID-19 pandemic. Some major US investment banks have already moved up their expectations for a Fed rate hike to October. The market is betting on a 50% probability of consecutive Fed rate hikes, essentially betting on continued oil price increases. Oil prices will determine the next policy move for major central banks. WTI crude oil spot prices have retreated from this week's high but remain relatively high around $100. The US, which had previously maintained a wait-and-see attitude towards the Middle East, has now significantly increased its diplomatic activities in this area. President Trump will meet with Gulf leaders next week. Reports indicate that China has called on Iran to mediate and reopen the Bab el-Mandeb Strait to curb the Houthi attacks (primarily targeting Saudi Arabia). Oman has also joined negotiations with the rebels. Negotiations and closed-door consultations typically signify a peaceful resolution to the conflict, but this time the situation may be different. Trump reportedly needs to make a "major decision" regarding the direction of the US-Iran conflict, with options including more aggressive military action targeting power plants and oil facilities. With only 46 days until the crucial US midterm elections, military action could cause oil prices to surge again, severely impacting Republican hopes of retaining control of Congress. Even before a new round of oil price increases has begun, the latest forecasts show an increasing probability of Democrats winning a majority in both the House and Senate. A US-Iran agreement, restoring oil transport through the Strait of Hormuz and the Bab el-Mandeb Strait, would be welcomed by investors and central banks worldwide. Next week's economic data calendar is relatively light; therefore, unexpected geopolitical developments in the Middle East will be the main source of market volatility. The Bank of Japan raised interest rates, but yen investors were greatly disappointed. The Bank of Japan raised interest rates by 25 basis points as expected, in line with market expectations. Despite a hawkish statement from the central bank, and Governor Kazuo Ueda's mention of increasingly aggressive corporate wage and pricing behavior, posing a risk of core inflation exceeding the 2% target, this stance failed to reassure the market. Newly appointed board members Asada and Sato voted against the rate hike, damaging market confidence and pushing the dollar higher against the yen. The exchange rate is currently around 156.74, having recovered half of its losses from early September and rising nearly 3% from the September 8 low of 152.88. The stock market downplayed the impact of the Fed's rate hike. The dollar performed strongly, but the impact of the Fed's rate hike on US stocks quickly faded. The S&P 500 and Nasdaq 100 closed sharply higher on Thursday, and stock index futures indicate a continued positive opening today. The decline in oil prices and sovereign bond yields on Thursday were the core drivers of the stock market rebound. It can be seen that the stock market is not afraid of the Fed's aggressive rate hike cycle, but is extremely concerned about weakening US economic growth momentum. Amid a tightening labor market and persistently rising prices, economic growth will be hampered, and may even reduce the amount of money companies invest in artificial intelligence.
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