AFS Markets Blog: Morning 08/09/2026

• Meanwhile in markets, the yen has emerged as the star performer in FX this month. On the fixed income side, US Treasuries are holding steady near Friday’s close after the long holiday weekend;

• Unsurprisingly, fed funds futures remain unbudged as well, with 15.5 bps of hikes priced in for next week’s FOMC meeting. The all-important CPI report on Friday will be the key deciding factor: a hot print will seal the deal for a hike, while continued signs of cooling inflation will give the board’s doves – like Governor Christopher Waller – real ammunition to argue for a hold, as they successfully did in July. With the Cleveland Fed’s nowcast putting August core CPI at 2.4 percent (just below July's 2.5 percent reading), it looks like the decision will come down to the wire;

• Over in Japan, there is cause for celebration as USDJPY trades at the 153 level – even briefly dipping into the 152 handle earlier this session for the first time since January. The yen has outperformed all major currencies against the greenback over the past month, posting a solid 3 percent gain. While the latest drop was accompanied by jawboning from Finance Minister Satsuki Katayama – who stressed that Japan's FX intervention stance hasn't changed – the real driver is shifting monetary policy expectations;

• Punters now firmly believe the Bank of Japan is preparing to hike rates at an accelerated pace. BOJ-dated TONAR swaps have nearly fully priced in a 25bps hike in September, followed by a subsequent 25bps increase in December. This marks a clear shift away from the BOJ's previous tempo of hiking only once every six months;

• Shifting to commodities, copper futures are nearing their highest level on record, trading within a percent of their peak closing price of $677 per pound. The recent rally – that leaves the metal up 15 percent YTD – is driven in part by the anticipation of new US tariffs on the metal – with US importers frontrunning the tariffs and draining existing stockpiles. Beyond the immediate squeeze, however, Doctor Copper is living up to its reputation as an economic bellwether, with high demand from power grid expansions and AI data centers putting pressure on its prices;

• Copper isn’t alone in its rally. The Rogers commodity index – a broad measure of commodity futures – has surged a whopping 43 percent in 2026, sitting essentially at a record high. This is no surprise given that energy is the index's largest component at roughly 40 percent, with agriculture and metals making up the rest. Given that Brent crude trading at $98 and up a massive 60 percent year-to-date, energy is doing a lot of the heavy lifting. Still, the strength is remarkably broad: looking across our screen we see nothing but green year-to-date for every metal and agricultural product we track;

• Moving to equities, the Nikkei is down a percent this morning, while Chinese on- and off-shore markets are sitting on more contained losses. S&P 500 futures are in the red as well – trading a quarter of a percent below yesterday’s close;

• Looking ahead, there is little on the calendar today. Sadly, the real action arrives on Thursday and Friday, starting with the ECB’s interest rate decision – a 25bps hike – and the US PPI report on Thursday

‍