Today’s Market Outlook Focus on U.S. PMI Data and Middle East Developments Amid Broad Dollar Weakness

Today’s Market Outlook
Focus on U.S. PMI Data and Middle East Developments Amid Broad Dollar Weakness

■ Market Summary

Dollar selling remains dominant in today’s FX market.

In the London morning session, USD/JPY is trading near 158.60, while EUR/USD is holding around 1.1705.

USD/JPY briefly fell to around 158.36, while EUR/USD rose to approximately 1.1711, highlighting the current weakness in the dollar.

The main driver has been the U.S. Treasury’s announcement that it will double the size of long-dated Treasury buybacks, which has pushed U.S. long-term yields lower.

The Dollar Index is also trading below its 200-day moving average, creating an environment where rallies in the dollar are likely to attract selling.

■ U.S. Treasury Long-Term Bond Buybacks

The U.S. Treasury announced that, beginning on 9 September, it will at least double the maximum size of long-term bond buybacks for liquidity-support purposes—from $2 billion to $4 billion per operation.

The announcement raised expectations of improved bond-market supply and demand, contributing to lower U.S. long-term yields.

In general, falling U.S. yields tend to weigh on the dollar.

In fact, dollar selling strengthened after the announcement, with EUR/USD rising into the 1.17 range and GBP/USD advancing into the mid-1.36 area.

However, while the buyback program supports market liquidity, it does not fully resolve concerns surrounding U.S. fiscal conditions, Treasury issuance, and inflation.

If long-term yields begin rising again, dollar buying could return quickly.

■ Treasury Secretary Bessent and U.S. Fiscal Policy

U.S. Treasury Secretary Bessent stated that the government has “many tools” available to support financial markets.

Measures aimed at improving U.S. fiscal sustainability are expected to be announced from this weekend into early next week.

A press conference regarding sanctions on Iran is also scheduled for the 24th.

Markets will focus on whether the fiscal measures can ease concerns over Treasury supply and demand.

If the measures reassure investors, they could help contain long-term yields.

Conversely, if they raise concerns about worsening fiscal conditions or increased Treasury issuance, higher long-term yields and dollar buying may follow.

■ Middle East Developments and Oil Prices

There are still no signs of improvement in tensions between the United States and Iran over the Strait of Hormuz.

Stronger sanctions on Iran and prolonged regional tension could push oil prices higher through concerns over supply disruptions.

If oil prices continue rising, this could lead to:

・Renewed inflation concerns
・Higher expectations for additional Fed rate hikes
・Rising U.S. long-term yields

In that case, the current dollar weakness could reverse into dollar buying.

However, if geopolitical risks escalate sharply, safe-haven yen buying is also likely to emerge.

USD/JPY may therefore struggle for clear direction, with dollar-buying and yen-buying factors competing against each other.

■ USD/JPY

USD/JPY is trading near 158.60.

The pair fell to around 158.36 in early London trading but is beginning to stabilize.

Dollar weakness is limiting the upside. At the same time, Japanese CPI remaining within market expectations and a widening trade deficit are both yen-negative factors.

As a result, USD/JPY may not decline in a straight line, with two-way trading likely around the 158 level.

On the upside, the upper 159 range and 160.00 remain important levels.

As the pair approaches 160.00, concerns over potential FX intervention by the Japanese government and Ministry of Finance are likely to rise rapidly.

■ EUR/USD and GBP/USD

EUR/USD is trading near 1.1705.

It briefly rose to around 1.1711, supported by dollar selling following the decline in U.S. yields.

If today’s U.S. PMI data is weak, concerns over slowing U.S. growth and reduced expectations for further tightening could push EUR/USD toward the upper 1.17 range.

Conversely, if U.S. PMI is strong and U.S. yields rebound, caution is needed for a correction back below 1.1700.

GBP/USD is also trading in the mid-1.36 range, benefiting from the weaker dollar.

However, U.K. PMI data could create pound-specific moves, potentially making GBP/USD more volatile than EUR/USD.

■ Bitcoin

Bitcoin has recovered the $70,000 level.

Buying has been supported by President Trump’s request for Congress to pass the “Clarity Act,” which aims to establish a regulatory framework for the cryptocurrency market.

Bitcoin briefly rose to $71,834, while Ethereum also posted a significant gain.

Progress on the legislation would likely be viewed positively as a step toward integrating crypto assets into the broader financial system.

However, deliberations in the Senate remain stalled, leaving uncertainty over whether the bill will ultimately pass.

Policy expectations may support the market in the short term, but caution is needed for profit-taking after the sharp rally.

■ Key Economic Indicators Today

・France August preliminary PMI
・Germany August preliminary PMI
・Eurozone August preliminary PMI
・U.K. August preliminary PMI
・U.S. August preliminary PMI
・Canada June retail sales
・ECB Eurozone consumer inflation expectations

■ Key Points for London and New York Trading

① Whether U.S. PMI signals an economic slowdown
② Whether U.S. long-term yields fall further or rebound after the PMI data
③ Whether the Dollar Index can recover its 200-day moving average
④ Whether USD/JPY can hold the 158 range
⑤ Whether USD/JPY moves toward the upper 159 range and 160.00
⑥ Whether EUR/USD can maintain the 1.17 range
⑦ Reports concerning U.S. fiscal sustainability measures
⑧ Further developments regarding the Strait of Hormuz and sanctions on Iran
⑨ Whether Bitcoin can maintain levels above $70,000

■ Summary

Dollar selling is currently dominant, driven by the expansion of U.S. Treasury long-term bond buybacks and lower U.S. yields.

USD/JPY is trading in the 158 range, EUR/USD is in the 1.17 range, and the Dollar Index remains below its 200-day moving average.

However, worsening Middle East tensions, higher oil prices, sanctions on Iran, and developments in U.S. fiscal policy could trigger a rebound in U.S. long-term yields and renewed dollar buying.

Markets will monitor global PMI data, U.S. yields, oil prices, and Middle East headlines to determine whether dollar weakness will continue or whether a pre-weekend dollar-buying correction will emerge.