Asia open: Dollar holds the line as central banks crowd the stage

Brace for a storm of central bank meetings

The dollar opened the Asian week like a ship steady at anchor, drifting directionless but not without purpose, as traders brace for a storm of central bank meetings that will shape the market’s compass heading.

Against the majors, the greenback was mixed, a sign less of conviction and more of waiting. Equity-index futures carried little momentum after the S&P closed flat, with Asian contracts pointing lower while Tokyo sits silent for a holiday. Oil slipped back after Trump pressed G7 allies to slap tariffs on China and India for buying Moscow’s barrels, underscoring the way geopolitics keeps bleeding into supply-demand math.

The real act, though, belongs to the Fed. A 25 bp trim is priced as a near-certainty, but the question hanging over the pit is whether Powell and his crew validate the market’s aggressive glide path — three cuts pencilled in before year-end — or push back. Futures are already softly whispering at a half-point, and traders know the stall horn is buzzing: payroll revisions have stripped nearly a million jobs from the ledger, unemployment is creeping higher, and jobless claims are running loud. A dovish dot-plot, even one voice calling for 50, could let the dollar sag while risk assets catch a bid.

This week won’t be a solo performance, either. The BoC, BoE, and BoJ are all stepping into the arena, each carrying domestic baggage — Canada’s growth jitters, Britain’s inflation puzzle, and Japan’s delicate dance toward normalization. Together, they ensure a week where liquidity will shift not just on Powell’s tone but on the echo from other capitals.

China adds another wild card. Today’s August data dump is expected to show firmer retail sales but slower industrial output, a split-screen economy that leaves Asia traders wary. Meanwhile, the second day of U.S.-China talks in Madrid keeps TikTok dangling as a geopolitical pawn, with the prospect of Trump and Xi meeting in October looming like the next act in a long-running trade play.

Add to that Fitch’s Friday downgrade of France — knocking Paris below the UK and leaving its bonds trading in the company of Lithuania and Slovakia — and the global backdrop feels like a marketplace where confidence has thinned. The premium over Bunds tells the story: investor patience with Macron’s political churn is fading.

For now, Asia opens with the dollar steady, like a tide neither advancing nor retreating, waiting for Powell’s hand on the throttle to decide which way the current will break.

When the central banks step into the arena

September feels less like a polite policy roundtable and more like the colosseum floor. Powell will stride out under the brightest torchlight, but Bailey’s Bank of England and Ueda’s Bank of Japan are also entering the pit, and their movements could change the flow of the crowd’s money in ways traders can’t ignore.

The Bank of England looks like a reluctant archer, bow drawn but hesitant to release. Last month’s rate cut to 4% was messy, requiring two rounds of voting and revealing just how fractured the committee has become. Since then, the data has been split: Q2 growth stronger than expected, but Q3 already stalling; inflation hotter than forecast and expectations rising, even as the labour market softens with falling vacancies and weaker pay growth. The ground is shifting beneath them, yet the Bank may do nothing until Chancellor Reeves unveils her Autumn Budget in late November — the so-called Winter Budget. Businesses are already warning that new taxes will simply boomerang into higher prices, leaving the BoE trapped between its bowstring and its target.

Across the sea, the Bank of Japan is the samurai at the gate, blade still sheathed but glowing hotter by the day. Inflation has run above target for three years, stripped of subsidies it’s still uncomfortably high, while households are spending, earnings have turned positive, and GDP has surprised to the upside. The yen, still weak at ¥147 after escaping the abyss of ¥160, trades as if Japan remains the kingdom of negative rates. A rate hike here would be more than technical adjustment — it would be a blade drawn, strengthening the currency, soothing bond markets, and even earning a nod from Washington. The risk is political: a leadership race could tempt the BoJ to wait. But that might be the very reason to act now, before a new prime minister complicates the battlefield.

The Fed will remain the ringmaster, but traders would be wise not to treat London and Tokyo as sideshows. When different gladiators strike in the same season, liquidity shifts, currencies reprice, and bond markets tremble. September’s central bank theatre won’t be a one-man act — it will be a clash of weapons echoing across the arena floor.

Madrid becomes the new fault line in US-China rivalry

The world’s two economic heavyweights circled each other in Madrid, not with fists but with trade ledgers and TikTok’s code dangling as bait. Scott Bessent led the U.S. side, flanked by Trade Rep Jamieson Greer, while China’s He Lifeng carried Beijing’s brief. Six hours of talks produced no breakthroughs, only the sense that both sides are mapping trenches before the next summit clash.

TikTok sat at the top of the agenda, its fate less about teenagers scrolling and more about who controls the pipelines of data. A deadline looms this week, but Trump framed it bluntly: “We may let it die, or we may… depends. Up to China.” In other words, Washington has turned TikTok into a bargaining chip, a pawn sacrificed or saved depending on Beijing’s concessions elsewhere.

Yet the Madrid meetings are also about carving the road to a potential Trump-Xi encounter in October at the Korea APEC summit. With only six weeks to hammer out “deliverables,” the diplomatic clock ticks loud, but Xi seems to sense he holds the upper hand. The Chinese side arrived with confidence — and with a shot across the bow. Hours before the talks, Beijing launched twin investigations into U.S. semiconductors, an unmistakable reminder that chips are now the live ammunition of this economic war. That volley came on the heels of Washington blacklisting 23 more Chinese firms for “national security” reasons.

Markets see the outline: tariffs sharpened, sanctions dangled, chips weaponized, social media apps turned into hostages. Madrid is less about finding common ground than testing which side blinks first before Trump and Xi step onto a bigger stage. For traders, this isn’t background noise — it’s the tectonic friction that could jolt currencies, equities, and tech supply chains in the weeks ahead.

Oil balances on a knife edge between politics and barrels

Crude is treading water, caught between Washington’s sanctions sabre and the cold math of oversupply. Brent holds near $67, WTI just under $63 — a range of less than $5 over the past month that speaks to a market hemmed in by equal and opposite forces.

On one side, the White House is sharpening the geopolitical blade. Trump has again told Europe to cut the Russian cord, warning that “major” sanctions on Moscow’s crude will only move if NATO countries sign on. Most EU members have walked away from Russian barrels, but stragglers like Hungary and Turkey remain the weak seams in the embargo. Now Washington is floating tariffs of up to 100% on China and India for mopping up those discounted flows — a shot aimed less at barrels than at the trade maps of tomorrow.

On the other side, the physical market is whispering surplus. Supply forecasts for later this year look heavy, and hedge funds have voted with their feet, cutting bullish positions in U.S. crude to record lows. The bid is thin, conviction thinner. Every rally meets the ceiling of fundamentals; every dip finds a floor in geopolitics.

Adding fuel to the churn, traders are eyeing two new flashpoints: Israeli strikes spilling into Qatar and Ukrainian drones clawing at one of Russia’s biggest refineries. These aren’t the kind of headlines that move barrels tomorrow, but they remind the tape that the oil market is never just about inventories and curves — it’s also about nerve endings across the geopolitical chessboard.

For now, crude trades like a fighter stuck against the ropes, swaying left and right, but not breaking out. Traders will have to decide whether the next decisive punch comes from sanctions policy or from a simple reality check on too many barrels chasing too few buyers.