The below key drivers are likely to impact investor risk sentiment and currency markets in September:

EUR | Euro

The euro has pushed to its highest levels in three months, rising above US$1.16, with the European Central Bank expected to increase rates on September 10 potentially offering further support.

The euro extended its recovery through August, with EURUSD climbing from the low $1.15s to trade around $1.167 by month-end, having briefly touched $1.1711 on August 20, its strongest level since May. A broadly softer US dollar did much of the work in August, helped along by the US Treasury’s decision to at least double its buyback of longer-dated government bonds, which pulled US yields lower and weighed on the greenback.

Eurozone data has also supported the euro. The composite Purchasing Managers’ Index rose to 52.1 in August, its highest since November, with a marked improvement in German manufacturing. Inflation remains a live issue, though: the eurozone’s annual rate rose to 2.9% in July from 2.8% in June, driven largely by a jump in energy costs tied to the US-Iran conflict. 

Markets generally expect the European Central Bank to raise its deposit rate by 25 basis points to 2.5% at its September 10 meeting, which would mark its second hike of the year. With the Federal Reserve’s own policy meeting following just days later on September 15-16, the interest rate gap between the two economies is likely to remain a key driver of EURUSD into month-end.

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GBP | Sterling

Sterling has climbed to a six-month high near US$1.365 on broad US dollar weakness, though the Bank of England’s September 17 decision and a looming Autumn Budget could cap further gains.

GBPUSD extended its summer rally through August, rising from the low $1.34s to a high of around $1.3676 by month-end, the sterling’s best level since February, as the softer US dollar lifted other major currencies broadly. At the July meeting, the Bank of England voted 6–3 to maintain the rate at 3.75%. The pound’s next major test comes on September 17, when the Bank of England votes on the pace of its balance sheet reduction. No further rate decision is scheduled until later in the year, so UK data, US developments and the Middle East are likely to keep driving sterling in the meantime. Behind the near-term strength, the fiscal picture remains a source of nerves: The UK Autumn Budget 2026 is scheduled to take place on October 28, and previous UK fiscal events have occasionally created uncertainty in gilt markets and sterling alike.

If US data continues to disappoint and the dollar stays soft, GBPUSD could test further toward its 52-week high. A reassertion of dollar strength around the Federal Reserve’s mid-September meeting, or renewed fiscal jitters as Parliament returns, could see gains pared back.

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AUD | Australian dollar

The Australian dollar jumped to fresh multi-month highs above US$0.718 after July inflation came in hotter than expected, which could put a September Reserve Bank of Australia rate hike back in play.

Australia’s July Consumer Price Index, released August 26, showed headline inflation easing to 3.5% year-on-year from 3.8% in June, but well above the 3.2% consensus. More importantly for the RBA, the trimmed mean measure, the Bank’s preferred gauge, held at 3.6% year-on-year, also above the 3.5% expected, with the monthly trimmed mean accelerating to 0.5% from 0.3%, comfortably ahead of forecasts. The pressure was broad-based rather than being confined to petrol, with housing, discretionary spending and transport all contributing to the upside surprise.

The result reverses what had been a fading case for further tightening after a run of soft jobs data. The RBA left the cash rate at 4.35% at its August meeting in a unanimous decision, with the minutes noting the Board judged policy “sufficiently restrictive” while flagging a meaningful risk that inflation could prove more persistent than expected. July’s CPI data pushed AUDUSD up to around 0.717–0.718 on the day, within reach of its 2026 high near 0.7277, as markets moved quickly to reprice the odds of a potential hike at the RBA’s next meeting on September 29. 

A hawkish RBA alongside continued US dollar softness could see AUDUSD test its cycle highs, while a rebound in the US dollar around the Federal Reserve’s own September meeting could bring the pair back toward the low $0.70s.

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NZD New Zealand dollar

The New Zealand dollar slipped despite the Reserve Bank of New Zealand delivering a widely-expected back-to-back rate hike, taking the Official Cash Rate to 2.75% at its September 2 decision.

NZDUSD had climbed steadily since late July, helped by a softer US dollar and by expectations that the Reserve Bank of New Zealand would keep tightening. The pair touched $0.598 at the end of August, its best level since late May, even as broader risk sentiment wobbled on escalating US sanctions against Iran.

The Reserve Bank’s Monetary Policy Committee reached the September 2 interest rate decision by consensus, judging that gradually removing monetary stimulus remains appropriate to return inflation to its 2% target midpoint while supporting growth and employment. Attention now turns to the Bank’s next decision on October 28: most major New Zealand bank economists expect at least one more hike to take the OCR toward 3%, though views diverge on how far the tightening cycle ultimately goes, with estimates of the “neutral” rate clustering around 3–3.25%. Softer domestic data, including a 0.5% fall in June-quarter retail sales, remains a mild offsetting factor.

With the near-term rate path now largely known, NZDUSD is likely to take more direction from US dollar moves and any signals the Reserve Bank gives on the pace of further tightening. A hawkish tilt toward an October move could help the kiwi stabilise, while a fresh bout of US dollar strength could see it test back toward the high $0.57s.

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USD | United States dollar

The US dollar has staged a sharp rebound off its five-month lows after Fed Chair Kevin Warsh’s hawkish Jackson Hole debut put a September rate hike back on the table.

The US Dollar Index (DXY) fell through most of August, dropping from the low 101s at the start of the month to a three-month low of 98.55–98.80 on August 21, driven largely by “plumbing” rather than data: the Treasury’s decision to at least double its buyback of longer-dated bonds pulled yields lower and weighed on the greenback. 

That reversed sharply into month-end: the Fed’s preferred inflation gauge showed annual PCE inflation at 3.7% in July, above expectations of 3.6%, and Chair Warsh used his August 28 Jackson Hole keynote to warn the Fed will “have work to do” if inflation doesn’t show clearer signs of returning to target. Markets read the remarks as his clearest hawkish signal yet, and the DXY rallied to around 99.5–99.65, reclaiming its 200-day moving average and closing in on 100.00.

The reaction in rate pricing has been just as sharp: futures now imply roughly a 50–57% chance of a hike at the Fed’s September 15–16 meeting, with a hike by year-end now close to fully priced. Warsh stopped short of committing to a September move and continues to withhold explicit forward guidance, but his tone was read as unambiguously more hawkish than his first FOMC meeting in July, when the Fed held rates at 3.50%–3.75%.

With the dollar now trading with a hike-in-September narrative behind it for the first time this cycle, the path into the FOMC meeting itself is likely to hinge on incoming inflation and labour market data, alongside how markets digest any further Fed commentary.

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JPY | Japanese yen

The yen has given back roughly half of its intervention-driven rally, with a Bank of Japan meeting on September 17-18 widely viewed as the next test of whether the recovery can hold.

USDJPY has traded a wide range since late July, when it touched a 40-year high near 163.70 before Japan and the United States confirmed a coordinated intervention on August 1, the first joint action of its kind since 2011, which briefly drove the pair into the mid-$156 area. Since then, the yen has drifted back to around 159 with no confirmed follow-up intervention, though officials have continued to signal they are watching the market closely.

The Bank of Japan held its policy rate at 1.00% at its July meeting in an 8-1 vote, with one board member pushing for an immediate hike, and the Bank flagging that core inflation is likely to run “clearly above” its 2% target in the second half of the fiscal year. Tokyo’s core inflation accelerated for a second straight month in July, and firming wage growth may contribute to the case for further tightening. The Bank’s next decision falls on September 17-18, alongside its quarterly Outlook Report, and will be watched closely for any signal that Governor Ueda is prepared to move again this year.

A hawkish Bank of Japan combined with continued US dollar softness could see USDJPY test back toward the 155 area. A wide Japan-US rate gap and any renewed dollar strength around the Fed’s September meeting, however, could see the pair drift back up toward its recent highs.

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CAD | Canadian dollar

An escalating US-Canada trade dispute has pushed the Canadian dollar off its recent highs, with Canada’s retaliatory tariffs coming into force on September 8.

The Canadian dollar’s recovery ran into trouble in late August after trade talks between Ottawa and Washington collapsed. The Trump administration confirmed 50% tariffs will apply to Canadian autos, trucks, parts and steel effective January 1, 2027, on top of existing levies on furniture, plastics, plywood and other goods, while Prime Minister Mark Carney has pledged retaliatory tariffs from September 8. USDCAD rose from a three-month low near 1.376 to around 1.386 as the news broke, unwinding much of the CAD’s August recovery.

The Bank of Canada held its policy rate at 2.25% for a sixth consecutive meeting on July 15 and is widely expected to hold again at its next decision on September 2 which had not yet been announced at the time of writing. The escalating trade dispute reduces the case for a near-term hike even as elevated oil prices, boosted by ongoing Middle East tensions, keep some inflationary pressure alive. Canadian employment data has been a bright spot, with a larger-than-expected 75,100 jobs added in July.

Further tariff escalation or retaliation news could push USDCAD higher still, while a de-escalation in the trade dispute or continued strength in Canadian jobs data could help the currency claw back some lost ground.

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SGD | Singapore dollar

USDSGD is holding in the mid-1.27s after last month’s surprise tightening by the Monetary Authority of Singapore.

The Singapore dollar has held its August gains into September, with USDSGD trading in the mid-1.27s after the Monetary Authority of Singapore surprised markets on July 27 by steepening the Singapore dollar’s appreciation slope for a second consecutive meeting. The move followed second-quarter GDP growth of 5.7% year-on-year, supported by strong artificial intelligence-related technology exports, alongside firming headline and core inflation.

With the Monetary Authority’s quarterly policy review not due again until October, USDSGD is likely to be influenced by the US dollar side of the pair through September. The greenback’s broad softness has been a primary reason USDSGD has drifted lower rather than higher despite the more-than-200-basis-point yield advantage US rates still hold over Singapore’s.

A further leg lower in the US dollar, or stronger-than-expected Singaporean growth and export data, could see USDSGD test toward 1.2650. A hawkish surprise from the Federal Reserve in September, or a pickup in trade tensions weighing on the city-state’s export-driven economy, could push the pair back toward 1.29.

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HKD | Hong Kong dollar

USDHKD continues to trade around 7.84 under Hong Kong’s Linked Exchange Rate System, with the local-US rate gap and continued capital inflows among key forces to watch in September.

USDHKD has traded in a narrow band around 7.84 through August, little changed as Hong Kong’s currency board arrangement keeps the pair tightly managed against the US dollar. One-month HIBOR has been trading in the 2.78% to 2.79% range, well below the equivalent US SOFR rate, encouraging carry-trade demand for US dollars that has been broadly offset by continued capital inflows, including robust local IPO activity earlier in the year and steady demand for Hong Kong assets.

With the Hong Kong Monetary Authority’s base rate moving in lockstep with the Federal Reserve, September’s FOMC decision is a key swing factor for the local-US rate gap this month. Barring a shift there, USDHKD is likely to remain capped comfortably below the 7.85 weak-side convertibility undertaking, with little scope for a large move either way given the currency board mechanism.

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What Jackson Hole 2026 Could Mean for the Dollar Read the article.

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