Global Forex and Fixed Income Roundup: Market Talk

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0653 GMT - The direction of USD/JPY and Japanese government bond yields will hinge on who wins the Liberal Democratic Party's Oct. 4 election, says Julius Baer in a note. Contenders include former economic security minister Sanae Takaichi and farm minister Shinjiro Koizumi, alongside former LDP secretary-general Toshimitsu Motegi and Chief Cabinet Secretary Yoshimasa Hayashi. The Nikkei briefly hit a record on Tuesday and JGB yields rose on anticipation of delayed rate hikes by the Bank of Japan due to politics, it says. "We expect a more expansionary fiscal policy, which would be negative for the JGBs but provide a more conducive pro-growth environment for equities." (monica.gupta@wsj.com)

0647 GMT - French government bonds, or OATs, are little changed in early trade, unfazed by the appointment of Sebastien Lecornu as new Prime Minister. His predecessor Francois Bayrou resigned after his government lost a confidence vote in the National Assembly on Monday over the budget. Lecornu, previously defense minister, is the fifth French prime minister in under two years. The 10-year OAT yield declines 0.3 basis points to 3.405%, according to Tradeweb. (emese.bartha@wsj.com)

0644 GMT - China's new loans likely rebounded to 800 billion yuan, equivalent to $112 billion, in August after falling by CNY50 billion in July, according to nine of the 13 economists polled by The Wall Street Journal. Credit demand has been weak this year amid sluggish consumption in the domestic market. M2, the broadest measure of money supply, likely rose 8.6% on year in August, easing slightly from July's 8.8% increase. The People's Bank of China is likely to release the credit data this week. (singaporeeditors@dowjones.com)

0643 GMT - The dollar falls slightly as investors weigh a bigger-than-expected downward revision to U.S. jobs data and await inflation figures. The Bureau of Labor Statistics on Tuesday said the economy added 911,000 fewer jobs than previously estimated in the year to March. However, the data are backward-looking and didn't offer any new insights to justify a major increase in expectations of U.S. interest-rate cuts, Commerzbank's Antje Praefcke says in a note. What matters now is whether upcoming price data show the first signs of tariffs having an effect, she says. U.S. producer prices data are due at 1230 GMT and consumer prices data are Thursday. The DXY dollar index falls 0.1% to 97.762. (renae.dyer@wsj.com)

0641 GMT - Given the downgrades in U.S. job creation, the Fed may indeed have fallen behind the curve while trying to anticipate tariff-led inflation, says Ipek Ozkardeskaya, senior analyst at Swissquote Bank. It could mean bigger and faster rate cuts in the coming months, depending on inflation. In the coming hours, the U.S. will publish PPI update for August, but the real question is how much of the rising input costs will flow into the CPI due tomorrow, she says. The stronger the inflation figures, the slower the Fed will lower interest rates, and that could demoralize investors who are currently happy to see the jobs market weaken in exchange for larger rate cuts, she says. (james.glynn@wsj.com; X @JamesGlynnWSJ)

0630 GMT - German Bunds are expected to trade without clear direction ahead of the European Central Bank's monetary policy meeting on Thursday, says Commerzbank Research's Hauke Siemssen in a note. "Bunds should lack a clear direction ahead of tomorrow's ECB meeting," the rates strategist says. Government bond supply will come from Germany and Portugal, while Luxembourg is expected to go ahead with the syndicated launch of a new 10-year bond. Eurozone government bond yields are little changed after market open, with the 10-year Bund yield falling 1.2 basis points to 2.653% and the 10-year French OAT yield easing 0.8 basis point to 3.467%, according to LSEG data. (emese.bartha@wsj.com)

0620 GMT - A final 25-basis-point interest-rate cut by the European Central Bank in December is still possible, Natixis' analysts Alain Durre and Hadrien Camatte say in a note. The precondition for that would be if the labor market softening appears more severe than expected and inflation drops well below target due to decreasing energy prices and stronger appreciation of the euro, they say. The analysts say there is a 60% probability for a last policy rate cut by the ECB at the December meeting with a terminal deposit rate of 1.75%. The ECB is expected to leave the policy rates unchanged on Thursday, with the deposit rate at 2.00%. (emese.bartha@wsj.com)

0604 GMT - U.S. Treasury yields edge higher in Asian trade, awaiting producer price inflation data on Wednesday and consumer price inflation figures on Thursday, both for August. "This time, the PPI will attract even more attention than usual both because it is released ahead of the August CPI and because the previous July release surprised significantly to the upside," says Danske Bank Research's Emilie Herbo in a note. The data will provide markets with the first sense of how tariff-related costs have continued to build, the assistant analyst says. The two-year Treasury yield is up 1 basis point to last trade at 3.550%, the 10-year Treasury yield rises 1.3 basis point to 4.087%, while the 30-year yield is up 1.8 basis points to 4.734%, according to Tradeweb. (emese.bartha@wsj.com)

0601 GMT - Norway's auction of 2030- and 2035-dated government bonds is expected to go well, with both bonds on offer looking relatively attractive, SEB's Erica Dalsto says in a note. "On a relative basis both the 4-5-year and 10-year segments look attractive at current levels, and we expect a solid auction," the chief Norway strategist says. Norway's annual government bond issuance target is 95 billion-105 billion kroner ($9.52 billion-$10.52 billion) for 2025. "As long as market conditions remain favorable, we expect Norges Bank to be opportunistic and issue closer to 105 billion kroner," she says. The combined offer volume at Wednesday's auction is 3 billion kroner. (emese.bartha@wsj.com)

0559 GMT - The U.S. dollar traded in a narrow range around 97.8 points in the Asia session. Poland, a NATO member, accused Russian drones of repeatedly violating its airspace and said the Russian drone incursion is "an act of aggression." Market participants are watching how President Trump will respond to the infringement of NATO airspace, says Carol Kong, strategist at CBA. Earlier, Trump reportedly said he is willing to impose new secondary tariffs on India and China to push Russian President Vladimir Putin to negotiate with Ukraine. China may also respond by threatening its own tariffs on imports from the U.S. and the EU. A repeat of the early April tit-for-tat trade measures would weigh on the USD, she adds. (james.glynn@wsj.com; X @JamesGlynnWSJ)

0551 GMT - The European Central Bank is in a comfortable position, and has no need to change its monetary stance, says Berenberg's Felix Schmidt ahead of the bank's policy decision on Thursday. "So far this year, the economy has proved to be more resilient than expected," the senior economist says in a note. Trade policy uncertainty has decreased somewhat and inflation is hovering around the central bank's target of 2%. The ECB's upcoming meeting is "likely to be one of the more uneventful ones, with the deposit rate widely predicted to stay at 2.0%," he says. The most exciting question is how the ECB would react if the current political turmoil in France were to cause financial market instability. (emese.bartha@wsj.com)

0545 GMT - There is no urgency for the European Central Bank to support the French bond market, Aberdeen's Luke Bartholomew says in a note. More direct intervention by the ECB to support the French bond market is unlikely to be forthcoming anytime soon given the restrictions in place on using the ECB's various liquidity tools and its desire to avoid involving itself in explicitly political questions, the deputy chief economist says. If market dysfunction were to get particularly bad, this might prove to be an ultimately untenable position for the ECB to hold given the systemic importance of France, he says. "But for now, we are a long way from there." (emese.bartha@wsj.com)