DXY trades sideways into the Fed policy decision; Iran's FM says that Tehran wants to return to a peaceful solution - Newsquawk US Market Open

Iranian FM Araghchi said the MoU with the US is in effect and that Tehran wants to return to a peaceful solution, and added that Iran is not interested in continuing the conflict and looks forward to returning to a diplomatic solution.
US equity futures gain, with the NQ outperforming following reports of a potential Intel-SK Hynix deal.
DXY flat; GBP saw two-way price action as headline CPI returns above 3%.
Fixed income benchmarks mixed; USTs await the FOMC policy announcement.
Energy pares back the recent upside, helped by the constructive commentary from Iran.
Looking ahead, highlights include US Retail Sales (Aug), Atlanta Fed GDP (Q3), New Zealand GDP (Q2), Fed Policy Announcement, BCB Policy Announcement, BoC Minutes. Speakers include ECB's Vujcic, Elderson & Nagel, Fed Chair Warsh.

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EUROPEAN TRADE

EQUITIES

European bourses (STOXX 600 +0.3%) are firmer across the board, rebounding from Tuesday's losses. The pullback in bond yields have helped support equities, with energy prices also lower today. Constructive commentary by Iranian FM Araghchi adds to the positive tone, stating that the MoU with the US is in effect and looks forward to returning to a diplomatic solution.
Sectors lack a clear bias. Basic Resources top the sector pile, with Utilities and Banks rounding out the sector gainers. To the downside lie Autos, with Optimised Personal Care and Media the sector laggards.
US equity futures are higher, following their European peers. Intel (+4.5%) has found some strength pre-market, following a Reuters report detailing potential talks with SK Hynix (+3%) about the production of memory chips in the US.
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FX

G10s trade tentatively against the USD ahead of a key FOMC policy decision later today. EUR and JPY hold marginally afloat, whilst the Loonie slightly lags vs peers.
DXY currently holds towards the lower end of a 99.53-99.73 range. Action has been lacklustre throughout the overnight session and for much of the European morning, with traders ultimately awaiting Retail Sales and the Fed policy decision later today. The former will likely spark little reaction given the close proximity to the Fed. On that note, expectations are for a 25bps hike; attention will be on if it is accompanied with hawkish rhetoric/guidance. This could either be provided through a hawkish set of SEPs, a unanimous hike or overt hawkish language at Warsh’s presser. At least one of these would likely be required to give bond traders enough confidence in market stability, to allow yields to edge off highs.
Note: A full Fed preview can be found on the Newsquawk Research Suite.
GBP had regional inflation metrics to digest this morning. Whilst headline rose from the prior (in-line), Core Y/Y and Services was unchanged from the previous month, indicating no signs of second-round effects. Therefore, the data is unlikely to shift views at the MPC into Thursday’s confab, where rates are expected to be held steady in a 6-3 vote split. Following the data, Cable saw some two-way action, before eventually moving lower as traders curtailed their rate hike bets.

FIXED INCOME

Global fixed benchmarks are mixed. USTs (-1 tick) are essentially flat, whilst Bunds (-6 ticks) are under mild pressure. Gilts (+38 ticks) outperform vs peers, following the region’s inflation metrics, which keeps a hold at tomorrow’s BoE meeting in play.
USTs are trading lacklustre within a 105-27+ to 106-02+ range. Ultimately, focus remains on the FOMC announcement later today, where rates are expected to be raised by 25bps. Attention for bond traders will be on whether there is a hawkish aftertaste (decision aside), which would likely allow yields to ease off best levels, given that hawkish commentary would signal that the Fed is offering some stability. Currently, the US 10-year sits around the 5% mark, and towards multi-decade highs.
Gilts outperform vs peers, benefiting from lower energy prices and following the region’s inflation report. On that point, whilst headline rose from the prior (in-line), Core Y/Y and Services were unchanged from the previous month; there is also a lack of evidence of second-round effects. Therefore, the data is unlikely to shift views at the MPC into Thursday’s confab, where rates are expected to be held steady in a 6-3 vote split. As such, traders curtailed their bets of a rate hike tomorrow, with money markets assigning a c. 30% chance of such a move.
Germany sells EUR 2.12bln vs Exp. 2.5bln 3.40% 2047 and 2.90% 2056 Bund.
Australia sells AUD 1bln in 3.75% April 2037 bonds: b/c 3.85x, avg. yield 5.3910%.

COMMODITIES

WTI Oct and Brent Nov futures are softer after yesterday’s renewed rally. WTI trades around USD 104.90/bbl within a USD 103.76-105.63/bbl range (vs yesterday’s USD 101.21-106.75/bbl range), while Brent trades around USD 108.43/bbl within a USD 107.15-108.59/bbl range (vs yesterday’s USD 105.10-109.45/bbl range). Energy benchmarks have come under modest pressure in recent trade following constructive commentary by Iranian FM Araghchi, stating that the MoU with the US is in effect and looks forward to returning to a diplomatic solution.
Dutch TTF was initially flat but is now posting mild gains. The Middle East conflict continues to sustain concerns around regional energy flows and European supply security. The contract trades around EUR 80/MWh within a EUR 79.93-83.28/MWh range at the time of writing, with Europe also looking ahead to the winter period.
Precious metals are firmer as the pullback in oil and Treasury yields provides some relief ahead of today’s FOMC decision, where markets lean heavily towards a 25bps hike. Spot gold has reclaimed USD 4,300/oz and trades around USD 4,330/oz within a USD 4,276-4,341/oz range, breaking above yesterday’s USD 4,317/oz high (vs yesterday’s USD 4,262-4,317/oz range). The Fed remains the key catalyst, with updated projections and Chair Warsh’s guidance set to provide the space with some impetus.
Base metals are modestly firmer as risk sentiment improves and Treasury yields ease ahead of the Fed, although the fundamental backdrop remains less supportive, with this week’s Chinese activity data showing continued weakness in domestic demand despite stronger industrial production, albeit upping calls for support. 3M LME copper resides in a narrow range above USD 14k/t, currently within USD 14,074.40-14,216.15.
US Private Inventory Data (bbls): Crude +7.1mln (exp. -1.8mln), Gasoline +1.5mln (exp. -1.2mln), Distillate +1.6mln (exp. +0.8mln), Cushing -0.2mln.
Russian plans to expand its diesel-export ban through October, according to Russian press.
CBRT Governor said global central banks are rediscovering gold.
Aluminium Bahrain CEO Al Baqali said damage to the smelter from the Iranian strike in March has already been repaired.
A gold mine collapsed in West Kordofan, Sudan, on Sunday, according to sources.

TRADE/TARIFFS

US is pressuring Mexican officials to accept new rules for exports of AI hardware to prevent Chinese companies and other foreign firms from circumventing tariffs, according to WSJ.

NOTABLE EUROPEAN HEADLINES

EU Commission President von der Leyen delivered her annual State of the Union address. On the trade front, she said the EU's trade deficit with China has reached its tipping point and are engaged with dialogue with China to rebalance trade, however warns of the use of all tools possible to rebalance trade. With Canada, she announced that they will create a common prosperity and economic security space covering manufacturing, technology, energy, AI, defence and the Arctic and proposed that Canada becomes the first associate member of the EU. For EU defence, she said that it is time for an Article 4-style EU security protocol and announced plans to establish a new European Instrument for military strategic enablers. She also announced that the EU will establish a new European cooperation to help obtain and stockpile critical raw materials.
UK Chancellor Healey is said to be considering budget tax rate on higher stakes slot machines, according to FT.
Senior German lawmaker Frei said that an energy price relief must come quickly and thinks that energy relief measures should come into effect in October, adding that lower sales tax on gasoline would be an obvious step to take, RTL TV reported.
Germany's Economy Ministry said it is continuously assessing the situation and maintaining ongoing dialogue with all market participants in the natural gas sector and welcomed SEFE's intention to step up efforts to fill gas storage.

NOTABLE EUROPEAN DATA RECAP

UK CPI (Aug YY) 3.1% vs. Exp. 3.1% (Prev. 2.9%); Services CPI 3.4% (prev. 3.4%).
UK CPI (Aug MM) 0.5% vs. Exp. 0.5% (Prev. 0.3%).
UK Core CPI (Aug YY) 2.6% vs. Exp. 2.6% (Prev. 2.6%).
UK Core CPI (Aug MM) 0.3% vs. Exp. 0.3% (Prev. 0.2%).
UK Retail Price Index (Aug YY) 3.4% vs. Exp. 3.5% (Prev. 3.2%).
UK Retail Price Index (Aug MM) 0.6% vs. Exp. 0.7% (Prev. 0.6%).
UK July ONS House Price Index 1.4% (prev. 2%).
Italian HICP Final (Aug YY) 3.2% vs. Exp. 3.2% (Prev. 2.9%).
Italian HICP Final (Aug MM) 0.1% vs. Exp. 0.1% (Prev. -1.0%).
ECB Wage Tracker Annual (2026): 2.202% (prev. estimate 2.301%).
European Industrial Production (Jul YY) 0.0% vs. Exp. -0.1% (Prev. -0.3%).
European Industrial Production (Jul MM) -0.1% vs. Exp. -0.2% (Prev. -0.1%).

CENTRAL BANKS

RBNZ Assistant Governor Silk is to leave the central bank after the December rate decision.

GEOPOLITICS

MIDDLE EAST

Iranian FM Araghchi said "The memorandum of understanding with America is in effect and we want to return to a peaceful solution", adding that Iran is not interested in continuing the conflict and looks forward to returning to a diplomatic solution.
Iran's Major General Rezaei said "there will be no negotiations until Iran's conditions are met".
IRGC Navy political deputy said no vessel in the Persian Gulf, Strait of Hormuz or Sea of Oman moves outside the supervision of the IRGC Navy, and added that Iran can target any vessel anywhere if it wishes, IRNA reported.
Iran said only a single-digit number of ships are currently passing through the Strait of Hormuz, disputing US claims that traffic through the strategic waterway is increasing. It was separately reported that Strait of Hormuz vessel transits fell to four, according to data.
Pakistan's military spokesperson said the Mekkah agreement with Saudi Arabia and Turkey will not affect Pakistan's strategic relationship with Iran, and reiterated that the pact is defensive in nature.
China's Foreign Minister met with their Iranian counterpart. China encouraged Iran and the US to exercise rationality, urged all parties to take effective measures to reopen the Strait and supported dialogue between Iran and Gulf states.
Explosions were heard in Iran's Qeshm which originated from the sea, according to IRNA.

RUSSIA-UKRAINE

Ukrainian President Zelensky said if Russia is prepared to agree to an energy ceasefire, it must bar any attacks on energy infrastructure in any form.
Ukrainian media reports explosions in Kyiv, while Polish military aircraft have been activated amid Russian strikes on Ukraine.

OTHER

US mulls purchasing warships from Japan and South Korea to counter China, according to Nikkei.

CRYPTO

Bitcoin holds steady after slipping to a low of USD 74.92k in Tuesday's session following the failure by the Senate to pass the Clarity Act.

APAC TRADE

APAC stocks were mixed in choppy trade, albeit with sentiment gradually improving, following the declines on Wall St and recent upside in oil, while participants now await the major central bank rate decisions, beginning with the FOMC later.
ASX 200 eked slight gains with strength seen in the commodity-related sectors and with sentiment also helped by M&A news after reports that Brookfield is to acquire Reliance Worldwide for USD 2.8bln, although gains are limited amid weakness in tech, real estate and consumer stocks.
Nikkei 225 traded indecisively after mixed data from Japan, in which Exports and Imports topped forecasts, but Machinery Orders disappointed.
KOSPI edged higher in two-way trade after swinging between gains and losses, while the tech heavyweights have shown some resilience with SK Hynix mildly underpinned after its union approved the tentative wage agreement in a re-vote.
Hang Seng and Shanghai Comp were mixed in range-bound trade, with the Hong Kong benchmark lacklustre as the special administrative region unveiled its first-ever Five-Year plan to align more closely with China, which some fear could be a step away from a free market, while the mainland pared initial losses with the PBoC upping its liquidity efforts.

NOTABLE ASIA-PAC HEADLINES

Hong Kong unveiled its first Five-Year Plan to align more closely with mainland China and stated it will adhere to the one country, two systems principle, as well as strengthen the role of the global offshore renminbi business hub. Hong Kong will hold an executive-led system, adopt a holistic approach to development and security, while it will attract China financial firms to the city for business and develop a commodity trading ecosystem. Furthermore, it aims to speed up the Northern Metropolis development and targets GDP growth within a reasonable range in the Five-Year Plan.
PBoC Governor Pan said slower loan growth may become a 'new grateful' and that slower credit growth can stabilise debt levels, while China will support local government financing vehicles to resolve debt risks. Furthermore, Pan said they will improve the short-term interest rate adjustment mechanism and further refine policy rates, as well as strengthen the role of policy interest rates.
China's Defence Minister said global security governance must be strengthened and they must build an equal and orderly multi-polar world, as well as find a new path to security featuring collaboration rather than confrontation and should uphold multilateralism. Furthermore, he stated that they support regional countries to decide their own future without external interference, while risks should be anticipated and diffused early to prevent minor friction turning into major disputes.

NOTABLE APAC DATA RECAP

Japanese Trade Balance (Aug) -1105.6B vs. Exp. -1052.6B (Prev. -638.3B).
Japanese Exports (Aug YY) 19.3% vs. Exp. 18.2% (Prev. 23.2%).
Japanese Imports (Aug YY) 28.0% vs. Exp. 26.3% (Prev. 27.9%).