Monday Recap: Fading Peace Hopes, September Interest Rate Hike Expectations, Revised Euroland GDP and North American Holiday Closures
September 7, 2026
(123) Like so many other weekends this year, developments around the Strait of Hormuz did not support claims that progress is being made on the diplomatic front. Oil prices are around 1% higher than last week’s closing levels.
Speculation is high that central bank interest rates will be lifted later this month at both the European Central Bank and the Bank of Japan. A 1.2% dollar decline against the yen is today’s most significant change in forex markets. Japanese reserves fell by a record $79 billion last month, reflecting JPN 15.4 trillion of intervention support for Japan’s currency.
The Federal Reserve also has a scheduled policy review in September. Strong labor market figures have buoyed market speculation that it will also tighten, although more doubt surrounds this decision than those in Japan and at the ECB.
Labor Day observances today in Canada and the United States (once the closest of allies but no longer friends) means that financial markets this Monday are fast approaching day’s end. The weighted DXY dollar index is 0.3% lower. Ten-year sovereign debt yields in countries open for business climbed by four basis points in Germany, Great Britain, Italy, and Spain and by five bps in France. The 10-year Japanese JGB is steady but firm at 2.90%, and Japan’s Nikkei kicked off this week with a stellar 2.1% advance. This followed news that Japan’s leading and coincident economic indicators in July had improved to their highest levels in 151 and 93 months, respectively. Equities in South Korea and Taiwan experienced robust gains, too, but Hong Kong’s Hang Seng index lost 0.9%. European share prices edged marginally lower. Bitcoin is around 1% weaker, and gold’s price is down 0.4%.
Dollar softness lifted the translation value of Chinese reserves by $19.6 to $3.438 trillion last month.
Today’s main data release involved revised Euroland GDP and employment growth. An upwardly revised non-annualized 0.6% GDP increase between the first and second quarters constitutes the best gain in four years and was associated with a 1.2% increase compared to a year earlier. Year-on-year growth had been estimated previously at 1.0%, and the new 1.2% reading is twice as much as 0.6% in the first quarter. Net foreign demand, with exports (+3.4%) rising more than twice the pace of imports accounted for 0.9 percentage points of GDP growth. Personal consumption chipped in a 0.2 percentage point boost, but inventories exerted a half percentage point drag. Government spending and business investment had nil effect. Employment rose 0.1% on quarter and 0.5% on year, the same as measured in the preliminary estimate.
Within the euro area, GDP last quarter grew 10.2% in Ireland, 0.7% in Spain, 0.4% in the Netherlands, 0.2% in Italy and 0.3% in Germany but remained flat in France.
Britain’s Lloyd’s house price index (formerly known as the Halifax index) slid in August by 0.2% and posted a year-on-year drop of 0.4%, its worst on-year comparison in 35 months.
German industrial production in August, which had been forecast to edge marginally upward, instead tumbled 1.1% (most in 11 months and was also 1.6% lower than a year earlier.
Austrian wholesale price inflation accelerated to a 42-month peak of 8.2% in August from 6.9% the month before.
In Germany, the far-right AfD captured over 40% of the vote to win the Saxony-Anhalt’s state election over the weekend. Although not unexpected, the result represents a major breakthrough for the party.
Swedish consumer prices fell 0.3% on month. Year-on-year inflation of 0.3% was lower than anticipated. Swedish real GDP in the second quarter rose 1.6% versus 1Q and by 3.3% from a year earlier.
Swiss GDP also accelerated last quarter, with gains of 1.9% versus 1Q and 2.6% compared to a year earlier.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Euroland GDP and employment growth, German industrial production, Japanese and Chinese reserves
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