Oil prices fell by around 2% on Wednesday ahead of a closely watched OPEC+ meeting at the end of the week, with expectations that producers will discuss a fresh output hike for October.

Brent crude dropped $1.16, or 1.7%, to $67.98 a barrel by 10:30 GMT, while U.S. West Texas Intermediate (WTI) crude fell $1.28, or 2%, to $64.31.

Sources told Reuters that eight members of OPEC and its allies in the OPEC+ coalition will discuss a possible additional increase at Sunday’s meeting, as the group seeks to reclaim market share.

Any new hike would mark the start of unwinding a second layer of output cuts of around 1.65 million barrels per day, equivalent to 1.6% of global demand, more than a year ahead of schedule. The alliance had already agreed to raise output targets by 2.2 million barrels per day between April and September, along with an additional 300,000 bpd for the UAE.

However, actual increases have fallen short of planned levels, as some members worked to offset past overproduction while others struggled to lift output due to capacity constraints.

Oil prices had closed more than 1% higher in the previous session after the United States imposed new sanctions on a shipping network led by an Iraqi-Kittitian businessman, accusing it of disguising Iranian oil as Iraqi crude.

In the U.S., a preliminary Reuters poll on Tuesday showed crude stocks fell last week, alongside declines in distillate and gasoline inventories. Three analysts surveyed expected crude inventories to have dropped by an average of 3.4 million barrels in the week ending August 29.

But weaker economic data capped gains, as the U.S. manufacturing sector contracted for a sixth consecutive month, with business confidence and activity dampened by tariffs imposed by President Donald Trump, pressuring the outlook for oil demand.

The U.S. dollar held steady against other major currencies on Tuesday, supported by safe-haven flows. The U.S. economic calendar includes job openings and factory orders data for July. Later in the session, markets will watch the Federal Reserve’s Beige Book report and comments from policymakers.

By 12:09 GMT, the dollar index was unchanged at 98.3, after reaching a high of 98.6 and a low of 98.1.

U.S. Dollar: Bond Market Turmoil Threatens Recent Gains

The dollar’s latest rally looks more like a nervous spasm than a sustainable shift. The move was less about U.S. fundamentals and more about turmoil in global bond markets. Long-term bond prices from London to Tokyo sold off sharply, sending yields to multi-decade highs and pulling the dollar upward in the process.

Beneath this volatility, however, fundamentals remain tilted against the greenback: the U.S. labor market is showing signs of slowing, Fed Chair Jerome Powell has signaled a bias toward prioritizing employment over inflation, and the central bank is preparing to ease.

Friday’s U.S. jobs report is the key weight on the market’s balance. If it confirms stagnation, the reaction is predictable: traders will reinforce bets on larger near-term cuts, the yield curve will steepen further, and global bond desks will reposition. The report, therefore, has less to do with payrolls themselves and more with the shape of the yield curve and the credibility of the Fed’s pivot.

The open question is where the dollar will settle. Will it continue to ride the wave of global bond selling, drawing temporary support from safe-haven flows? Or will it realign with two-year U.S. Treasury yields, the traditional compass for FX traders? If cuts are aggressively priced in, two-year yields will bear the burden, potentially undermining the dollar’s base. For now, as long as global bond volatility remains elevated, the dollar can draw oxygen from safe-haven demand.

In short, the jobs report is pivotal. Weak data would set the stage for a series of easing steps, steepening yield curves further and eroding the dollar’s link with two-year yields. Only if this shift sparks broader risk aversion can the dollar hold on to its recent gains. Until then, the currency seems stuck between short-end U.S. yields and global bond market turmoil.

The author adds: “I see trimming dollar shorts as tactical, not the start of a broad squeeze higher — perhaps toward 1.15 — though I wouldn’t hesitate to buy dips. Yesterday’s dollar rally, sparked by heavy selling in UK Gilts and French OATs, lacked broad conviction.”

He notes that debt concerns outside the U.S. may have prompted some investors to reduce exposure, but argues this fuel is insufficient for a sustained dollar rally. “I’m watching dips, but patience is key; levels below 1.1625 are rare, and I’d rather wait than chase until the market forces my hand.”

The labor story extends beyond nonfarm payrolls, as Trump’s appointment of a new Bureau of Labor Statistics head raises questions about the credibility of official data. That places greater weight on secondary indicators such as JOLTS, which shows job vacancies declining but still well above pre-COVID averages. If layoffs continue to fall, policy repricing may be slower; if they start to rise, Fed easing could accelerate. In either case, Powell has made clear that risks are tilted toward employment, not inflation.

For the euro, valuation models point to fair value closer to 1.18, suggesting EUR/USD remains undervalued even with political risks in France. French OAT weakness may limit enthusiasm, but unless the crisis spreads more broadly, the impact on the single currency looks largely absorbed. Meanwhile, a stronger-than-expected 2.3% core CPI reading yesterday lifted two-year euro swaps and briefly eased 2025 rate-cut expectations. Still, ECB officials continue to signal they are “well positioned,” implying any policy shift will remain data-driven.

In Japan, global bond market turmoil extended further. Thirty-year JGB yields hit a record 3.28%, while 20-year yields reached levels not seen since 1999. These moves reflect politics as much as numbers: Prime Minister Fumio Ishiba faces pressure after a poor July election result, and investors fear a populist successor could boost fiscal spending and pressure the BoJ to slow rate hikes. Tomorrow’s 30-year bond auction will be a key test, with insurers showing little appetite for long maturities, preferring shorter tenors.

Altogether, the U.S. dollar looks suspended in mid-air rather than grounded on firm fundamentals. Safe-haven demand tied to foreign debt concerns cannot mask the opposite pull from the Fed’s pivot toward easing. The euro remains undervalued, the yen hostage to politics, and global bonds the fault line running beneath all assets.

The author concludes: “Dollar momentum looks fragile, ready to crack once the jobs data hits. Until then, I’ll keep most cash on the sidelines — ready to sell into deeper dollar rallies if they reach my levels, and chase dollar weakness only when the market itself opens the door.”

Gold prices rose in European trading on Wednesday, extending gains for a seventh consecutive session and continuing to break records after surpassing the $3,500-per-ounce mark for the first time in history. The metal drew strong safe-haven demand amid mounting concerns over rising global debt levels.

With strong expectations that the Federal Reserve will cut interest rates by 25 basis points at its September meeting, global financial markets are now turning their focus to a series of key U.S. labor market data beginning today.

Price Overview

• Gold prices today: Spot gold rose by 0.4% to $3,546.90, an all-time high, from the session’s opening at $3,533.27, after touching a low of $3,526.47.

• On Tuesday, gold settled 1.65% higher, marking a sixth straight daily gain—the longest winning streak this year—supported by strong investment flows.

Global Debt

Traders sold off long-term government bonds this week across Europe, the UK, and the U.S., as fears resurfaced about surging debt levels in major economies. Markets grew increasingly concerned that governments could lose control over widening fiscal deficits, raising borrowing costs and adding pressure to global financial stability.

Trade Tensions

Uncertainty also increased after the Trump administration announced it would seek an urgent Supreme Court ruling on tariffs that a U.S. appeals court deemed illegal last week.

U.S. Interest Rates

• San Francisco Fed President Mary Daly reiterated support on Friday for lowering rates, citing risks to the labor market.

• According to CME FedWatch: Markets currently price a 92% chance of a 25-basis-point rate cut at the September meeting, with only an 8% probability of no change.

• Odds of a 25-basis-point cut in October are even higher, at 95%, versus 5% for no move.

• To recalibrate September expectations, investors await a slate of key U.S. labor data this week: July job openings due later today, ADP private payrolls and weekly jobless claims on Thursday, and Friday’s August nonfarm payrolls report.

Outlook for Gold

• Ilya Spivak, macro strategist, noted: “The Supreme Court case has injected significant uncertainty into markets. If the outcome goes against the president, it could fundamentally reshape the macroeconomic landscape.”

• He added: “Any attempt to undermine the independence of the Federal Reserve is also highly significant. The direction for gold remains clearly higher, with momentum largely one-sided.”

SPDR Holdings

Holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 12.88 metric tons on Tuesday—the largest daily increase since March 21—bringing the total to 990.56 metric tons, the highest level since August 16, 2022.

The British pound fell in European trading on Wednesday against a basket of global currencies, extending losses for a second consecutive session against the U.S. dollar. The currency is now nearing a four-week low as heavy selling continued amid concerns over the UK’s financial stability.

The selloff in UK government bonds coincided with weakness across major sovereign debt markets, as investor focus remains fixed on rising debt levels.

Price Overview

• GBP/USD declined by more than 0.2% to $1.3359, down from the session’s opening at $1.3389, after recording a high of $1.3396.

• On Tuesday, the pound lost 1.1% against the dollar, marking its steepest daily drop since April 4, as heavy selling intensified on worries about the government’s ability to control the nation’s finances.

UK Bonds

The UK gilt market came under severe pressure, with 30-year borrowing costs rising to their highest level since 1998, leaving the pound under heavy downside pressure. The bond selloff mirrored moves in global markets, where concerns about elevated debt burdens dominated sentiment.

Starmer’s Changes

Prime Minister Keir Starmer appointed former Bank of England Deputy Governor Minouche Shafik as his chief economic adviser, in a move aimed at strengthening his economic credentials ahead of what is expected to be a highly challenging budget later this year.

The decision sparked political debate in the UK, with critics suggesting it undermines the standing of Chancellor Rachel Reeves within the government. Analysts noted that the reshuffle on Parliament’s first day back from summer recess sharpened focus on the economic challenges of high borrowing, slowing growth, and the highest inflation rate among G7 economies.

Market Commentary

• Ray Attrill, head of FX strategy at National Australia Bank, said: “The deterioration of public finances is essentially a European problem. France faces the same issues. They’ve been in the background for some time.”

• He added: “It likely resonates more in the UK because of the Liz Truss episode… Part of the concern is the upcoming autumn statement or budget.”

• Attrill continued: “At this stage, there’s a lack of market confidence that the government is ready to tackle the scale of the fiscal deficit and the rapid debt build-up effectively.”

• Mark Dowding, chief investment officer for fixed income at RBC BlueBay Asset Management, noted: “Everyone wants reassurance on the soundness of public finances, but with yields rising, the fiscal gap is only widening.”

• Nick Kennedy, FX strategist at Lloyds, added: “The UK has faced a precarious fiscal situation, and that will continue. Over the summer there was some risk in the interest rate market. Now investors want to extend that risk to the pound as well.”