United States

Lower unemployment claims gave the dollar fresh support. Initial applications fell by 4,000 to 203,000, below the 208,000 forecast, while continuing claims declined from 1.796 million to 1.778 million. The figures suggested that layoffs remained limited, leaving the Federal Reserve room to focus on inflation.

Before Warsh’s address, investors were looking for evidence that he would support further rate increases. Those expectations kept EUR/USD under pressure. President Donald Trump also left open the possibility of sanctions against Chinese banks handling Iran-related business, adding another source of uncertainty to US–China relations.

Eurozone

France delivered an awkward combination of stagnant growth and rising inflation. Second-quarter GDP growth was revised down to zero from an initial estimate of 0.2%. August’s preliminary annual inflation rate rose to 2.4% from 2.1%, while the EU-harmonised measure reached 2.7%, up from 2.4%. Monthly increases were 0.7% and 0.8%, respectively.

The figures complicate the ECB’s September decision: renewed price pressure supports the case for another rate increase, but weak growth argues for caution. The euro lost ground against the dollar while gaining against the yen.

United Kingdom

British business sentiment improved despite sterling’s decline against the dollar. The Lloyds Business Barometer rose from 49% to 53% in August, above its 12-month average of 47%. Economic optimism increased to 49%, and confidence in firms’ own trading prospects reached 58%. Companies reported stronger demand, while the share planning price increases fell to 51%, its lowest since 2022.

Japan

The yen weakened against the dollar and major European currencies even as Tokyo’s inflation figures strengthened the case for a Bank of Japan rate increase. Headline inflation rose from 1.2% to 1.4% in August, while core inflation, which excludes fresh food, edged up from 1.7% to 1.8%.

Deputy Governor Ryozo Himino had urged timely policy adjustments as import costs and energy prices increased inflation risks. Currency intervention remained another consideration: Japan disclosed record spending of ¥15.4 trillion to support the yen between July 30 and August 26.

Australia

The Australian dollar advanced ahead of the following week’s GDP release. Westpac forecast second-quarter growth of 0.2% quarter-on-quarter and 1.7% year-on-year. A weak result could temper expectations of further Reserve Bank of Australia tightening, although slow growth alone would not remove concerns about inflation.

Oil

Crude prices eased as traders hoped Washington’s greater reliance on sanctions would reduce the immediate risk of further fighting. The economic campaign was already underway: the US Treasury launched Operation Economic Outcast on August 24 and sanctioned nearly 60 Iran-linked entities, individuals and vessels. Wider restrictions could still threaten supplies, keeping the WTI outlook sensitive to developments in the Persian Gulf.

Inventory reports gave a mixed signal. API estimated a 4.2 million-barrel increase in US crude stocks, but the subsequent EIA report showed a build of only 95,000 barrels, well below expectations. The smaller official increase softened the bearish message from API rather than adding a clear new reason to sell.