From Sept 21 to 27, oil news pulled the U.S. dollar in different directions, while the Japanese yen stayed under pressure. From Sept 28 to Oct 4, traders will get fresh U.S. inflation and jobs data.

Key Takeaways

• Oil fell after news that the Strait of Hormuz could reopen, but ships were still moving through the route in limited numbers.
• The dollar moved unevenly as traders weighed lower oil prices against the chance of another U.S. interest rate increase.
• The yen remained weak even though the Bank of Japan had raised rates the week before.
• U.S.–China talks lowered the immediate risk of higher trade taxes.
• U.S. inflation and jobs reports, plus euro area inflation, are due this week.

What happened in the forex market last week, Sept 21–27?

Oil news changed the outlook for inflation

The Strait of Hormuz was the week’s biggest oil story. It is a narrow sea route that carries oil and gas from the Middle East. When ships cannot move through it easily, traders worry about supplies.

At the start of last week, shipping was still limited. Data reported on Sept 21 showed that 17 tracked commodity ships had crossed the strait over the weekend, down from 37 the weekend before. Some ships travel without tracking signals, so this count did not include every shipment.

Then the story shifted. On Sept 22, an Iranian official said the route could reopen if the United States eased military pressure and lifted its blockade on Iranian ports. Oil prices fell as traders weighed the chance of more supply reaching buyers. Brent crude, a widely watched oil price, moved below $100 a barrel.

The route had not reopened. That detail matters. A possible deal eased some fear, but the shipping problem was still real. New talks, attacks or changes in vessel traffic could change oil prices again.

For currencies, the link is inflation. Higher oil can raise the cost of fuel, transport and goods. Central banks may then keep interest rates high to slow price increases. Lower oil can ease that pressure, but one drop does not settle the inflation outlook.

The dollar had no clear direction

The U.S. dollar reached a two-month high during Tuesday’s trading, then moved between gains and losses. Traders were weighing two signals that pointed in different directions.

First, falling oil offered some hope that inflation might cool. Inflation means prices are rising across the economy. If it slows, the Federal Reserve may feel less pressure to raise U.S. interest rates again.

Second, Fed officials were still concerned about inflation. The Federal Reserve, or Fed, is the U.S. central bank. It had raised rates the week before, and officials said more increases could be needed if price pressure remained high.

Higher interest rates can draw investors toward a currency. That helped support the dollar, even as cheaper oil eased some inflation fears. The result was a mixed week for the dollar, not one simple move.

The yen stayed weak after Japan raised rates

The Bank of Japan had also raised its interest rate the week before. Even so, the yen remained under pressure against the dollar.

Why? Traders were unsure how quickly Japan would raise rates again. They also watched the large gap between U.S. and Japanese interest rates. If U.S. rates remain more attractive, demand for the dollar may stay strong against the yen.

This put USD/JPY, the dollar against the yen, in focus. Traders also watched for comments from Japanese officials about the weak currency. Such comments can move the market, but they do not by themselves mean Japan has stepped in to buy yen.

U.S.–China talks eased one near-term worry

China’s yuan reached a multi-year high against the dollar early last week, ahead of talks between U.S. and Chinese leaders.

The two countries later agreed to extend their trade truce by two months. A tariff is a tax on imported goods. The extension lowered the immediate risk of a new tariff increase. It did not resolve the larger trade and technology disputes.

The news mattered beyond the yuan. Major changes in U.S.–China trade ties can affect how traders view Asian economies and currencies. For now, the truce gave markets more time, while leaving the next round of talks important.

What can forex traders expect this week, Sept 28–Oct 4?

This week shifts attention from political headlines to scheduled economic reports. Their results are not available yet. What matters is what they reveal about prices, jobs and the possible path of interest rates.

Tuesday, Sept 29: U.S. job openings

The U.S. job openings report counts positions that employers are trying to fill. It can show whether demand for workers is cooling or staying strong.

Traders may compare this report with Friday’s larger jobs release. Together, they could change expectations for the Fed’s next decision.

Wednesday, Sept 30: U.S. inflation and growth

The PCE price index measures changes in prices paid by U.S. consumers. It is a closely watched inflation measure for the Fed. An updated estimate of U.S. economic growth is due on the same day.

The two reports may tell different stories. For example, growth could remain firm while inflation cools, or prices could stay high as growth slows. Traders will have the figures on Wednesday; there is no confirmed outcome yet.

Thursday, Oct 1: U.S. factory activity

The Institute for Supply Management is due to release its U.S. manufacturing report. It surveys factory businesses about conditions such as production and new orders.

The report may help show whether factories are gaining or losing pace. Traders may also look for signs that business costs remain high.

Friday, Oct 2: U.S. jobs and euro area inflation

Friday brings the U.S. monthly jobs report. Its Non-Farm Payrolls, or NFP, figure measures job creation outside farming. The report also includes the unemployment rate.

The euro area’s early estimate of September inflation is due the same day. That makes EUR/USD, the euro against the dollar, a key pair to follow. Traders will receive new information about U.S. jobs and European prices within the same session. Either report could change expectations for future interest rates.

Conclusion

Last week, a possible easing of the oil supply problem met a Fed that was still worried about inflation. This week’s jobs and price reports may give traders a clearer picture. The Strait of Hormuz remains the news risk that could change that picture quickly.