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

• A busy central bank calendar this month, with the Federal Reserve, European Central Bank, Bank of Japan, and Bank of England all due to meet, several with hike/hold uncertainty attached.
• The US-Canada trade relationship has taken a sharp turn for the worse, with fresh US tariffs on Canadian autos, steel and other goods, and Canada’s retaliatory measures due to begin September 8, adding a new cross-market risk.
• The US dollar has snapped back sharply after Fed Chair Kevin Warsh’s hawkish Jackson Hole debut revived September rate-hike bets, reversing a slide to five-month lows driven earlier in August by the Treasury’s bond buybacks, even as US-Iran tensions periodically support safe-haven demand.

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.

Expected ranges:

• EUR – USD 1.1500-1.1850
• EUR – GBP 0.8450-0.8650

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.

GBP-USD 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.

Expected ranges:

• GBP – USD 1.3400-1.3800
• GBP – EUR 1.1500-1.1800

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.

Expected range:

DXY 98.80-100.50

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