ETO Markets Buzz | Strong US Jobs Revive Fed Hike Risk as CPI Becomes Key Test

Global Market Overview | September 2026

According to ETO Markets analysis, global markets are entering a more sensitive phase as stronger US labour data revive expectations for a more hawkish Federal Reserve. US equities closed lower after Non-Farm Payrolls rose by 162,000 in August, well above expectations of around 56,000 and sharply above the previous 21,000 reading.

The stronger employment report reinforced the view that the US economy remains close to full employment. Markets are now pricing roughly a 52% probability of a 25-basis-point Fed Funds rate increase at the September meeting. Precious metals initially sold off as yields and the US dollar strengthened, but gold and silver later recovered much of the decline on solid underlying buying demand.

US Labour Market Strengthens

The August employment report showed broad labour-market resilience. The unemployment rate held steady at 4.1%, while labour-force participation rose to 61.6% from 61.4%, indicating stronger hiring was supported by a larger labour pool rather than lower participation.

Wage growth also remained firm. Average hourly earnings rose 0.3% month on month and 3.1% year on year, while average weekly hours increased to 34.4. Private payrolls added 127,000 jobs, manufacturing gained 16,000, and government employment rose by 35,000. The U-6 unemployment rate also declined to 7.7% from 7.9%, pointing to less labour-market slack.

Fed Policy Risk Rebuilds

For the Federal Reserve, stronger employment reduces the urgency to provide policy support and keeps the focus on inflation. A tight labour market can sustain wage growth, household demand and service-sector price pressure, making inflation harder to bring back to target.

The jobs report alone is unlikely to decide the September policy outcome. However, it raises the importance of this weeks CPI release. A stronger inflation print would reinforce the case for tighter policy, while softer data could ease pressure on yields, the dollar and risk assets.

CPI Becomes Main Catalyst

Headline CPI is expected to rise 0.1% month on month, following a previous 0.4% increase, while annual inflation is expected to remain elevated at around 3.4%. Core CPI is expected to rise 0.2% month on month, with the annual core rate forecast near 2.5%, slightly above the previous 2.4% reading.

A CPI print at or below 3.3%, especially with core inflation contained at 0.2% month on month, may be enough to keep the Fed on hold in September. A result materially above 3.4%, particularly with core inflation at 0.3% or higher, would increase the probability of a rate hike.

Europe and China Show Pressure

Outside the United States, the global data picture remains uneven. EU retail sales fell 0.6% month on month, while German retail sales dropped 3.4% against expectations for no change, marking the weakest pace in two years.

Chinas inflation data will also be closely watched. CPI is expected at 0.7% year on year and -0.1% month on month, while PPI is expected around 3.5%. These figures will help markets assess domestic demand, producer-price pressure and the next phase of policy support.

Yen Intervention Remains Relevant

Japan remains an important currency focus. Authorities have repeatedly acted to limit excessive yen weakness because a weaker currency raises import costs for energy, food and raw materials, feeding directly into domestic inflation.

The key distinction is between Bank of Japan policy and direct foreign-exchange intervention. Higher Japanese rates can support the yen by narrowing the US-Japan yield gap, while direct intervention is generally directed by the Ministry of Finance and executed by the Bank of Japan. Any renewed yen strength could pressure USD/JPY if carry trades unwind.

Outlook

Looking ahead, ETO Markets expects US CPI and PPI inflation, Federal Reserve communication, Persian Gulf energy risks, China trade and inflation data, European Central Bank policy, UK GDP, Japan wages and Taiwan trade figures to remain key market drivers.

In this environment, ETO Markets continues to emphasise close monitoring of inflation, wage growth, labour-market slack, dollar momentum and yen intervention risk. Strong US employment has rebuilt the case for tighter Fed policy, but the next CPI release will decide whether markets extend or reverse the latest hawkish repricing.

Disclaimer

The information contained herein is for general reference only and does not constitute investment advice, a solicitation, or an offer to buy or sell any financial products.

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