Forex week in review 37/2026: the ECB hikes and the yen squeeze runs on

Two weeks ago the story was the Fed and last week it was the Bank of Japan. This week it was both, plus the European Central Bank. USD/JPY broke a level that weeks of official intervention had failed to break and touched 152.88. The ECB raised rates for the second time this year. And a firmer-than-expected core CPI reading on Friday left the Fed on course for its own hike next week. The dollar index barely moved over the five days, closing at 99.12 against 99.16 a week earlier, but that flat number hides a lot of activity underneath.

The useful idea this week is that when several central banks are tightening at the same time, currency moves depend on who surprises, not on who hikes. The ECB raised rates and the euro slipped. The BoJ had not done anything yet, and the yen rallied. Our central banks and interest rates guide explains why markets trade the expected path of rates rather than the decision itself.

The backdrop

Last week ended with USD/JPY at 156.22 after a 2.4% fall, driven by signals from BoJ Governor Kazuo Ueda and board member Hajime Takata that a September hike was in play. US payrolls had beaten forecasts by a wide margin on Friday, and CNBC reported markets pricing roughly a 60% chance of a Fed hike on 16 September. The ECB was widely expected to raise rates on Thursday, and euro-area inflation had jumped to 3.3% in August. Oil remained elevated, with the US–Iran conflict and disruption around the Strait of Hormuz keeping Brent close to $100.

Day by day

Monday 7 September: 155 gives way on a US holiday

US markets were closed for Labor Day, so liquidity was lighter than usual. According to Korean outlet FNNews, citing the Nikkei, USD/JPY fell below 155 on Monday, a level it described as resistance that intervention had not broken. Stop-loss orders below 155 were triggered, adding to the yen buying, and the yen rose about 1.2% on the day.

That is a textbook example of how a level works in practice. A round number that has held several times attracts stop orders just beyond it. When price finally gets there, those stops become market orders, and the move accelerates. Our guide to support and resistance explains why round numbers and prior turning points matter, and why a break can be violent.

Tuesday 8 September: 152.89

In Asian trading the yen rose as much as 1% more, to 152.89 per dollar, its strongest level since February and stronger than anything seen during Japan's July intervention, according to CNBC. Reports from CNBC, FinancialJuice and FNNews listed several reasons:

• Market-implied odds of a BoJ hike on 18 September rose sharply; FNNews reported them at 97% that morning.
• Japan's second-quarter growth was revised higher, and July wages rose at their fastest pace in nearly three decades.
• Speculative short-yen positions and carry trades were being unwound.
• Some reports cited the possibility of Japanese investors repatriating funds.

Marc Chandler of Bannockburn Global Forex called it "a powerful short squeeze" and saw little sign of official intervention. Japanese Finance Minister Satsuki Katayama said Tokyo and Washington remained aligned on currency policy and that Japan's stance was "unchanged". FNNews noted that USD/JPY had fallen 7.50 yen in six trading days from 160.39 on 2 September.

The yen gave back part of its gains later in the day; CNBC had it at 154.25 in New York trading. EUR/USD was flat around 1.1627, while EUR/JPY sat near a nine-month low around 179.33. The dollar index was down 0.3% at 98.84. Elsewhere, Brent crude was near $98, the 10-year Treasury yield was about 4.80%, and the Canadian dollar strengthened slightly to about C$1.377 even as Canada's retaliatory tariffs on US goods took effect.

Wednesday 9 September

A calmer session for currencies. The US Treasury's enlarged buyback operations for long-dated debt were due to begin around this date, part of the policy announced in August that had weighed on the dollar at the time. USD/JPY consolidated in the low-to-mid 153s after Tuesday's swing, a reminder that even powerful moves rarely travel in a straight line.

Thursday 10 September: the ECB hikes

The ECB raised all three key rates by 25 basis points: the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending rate to 2.90%, effective 16 September. It was the second hike of 2026.

The new staff projections put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, with the 2027 and 2028 figures revised up. Core inflation was projected at 2.5%, 2.6% and 2.3%. Growth was revised up to 0.9% for 2026 and 1.4% for 2027. The statement said the conflict in the Middle East "continues to generate inflation pressures" and that inflation "is set to remain well above target for an extended period", while repeating that decisions would be made meeting by meeting.

Trading Economics reported that Lagarde called the decision a "no-brainer", that sources suggested another hike could come as soon as October, and that money markets priced three more ECB hikes by March. And yet the euro fell against the dollar in the aftermath, according to FXStreet, while gaining a little against the yen. This is "buy the rumour, sell the fact" in action: the hike had been priced for weeks, so the decision itself added nothing new.

Friday 11 September: core CPI beats

The euro weakened towards $1.16 ahead of the US data. At 8:30 a.m. Eastern the BLS published August CPI:

• Headline CPI rose 0.4% on the month and 3.4% on the year, matching consensus.
• Core CPI (excluding food and energy) rose 0.3% on the month against a 0.2% consensus, and 2.4% on the year.
• Energy rose 2.1% on the month and 16.3% on the year. Gasoline rose 3.9% on the month and 27.4% on the year.

The headline matched expectations, but the core beat by a tenth. That tenth mattered because the Fed was meeting four days later. InvestingLive reported after the meeting that the hike had been fully priced beforehand. USD/JPY traded between roughly 153.3 and 154.6 across Thursday and Friday before closing at 153.55, and the dollar index ended the week at 99.12.

Pair by pair

USD/JPY: 156.21 to 153.55

USD/JPY fell 1.70% on the week, after 2.42% the week before. The two-week move from above 160 to below 153 is roughly 4.5%. FNNews reported that since the end of August the yen had gained around 3.5% against the dollar and a similar amount against the euro, the pound and the Swiss franc, which tells you it was a yen story rather than a dollar story.

The technical picture also changed. FNNews described a "triple top" on the USD/JPY chart: three failures near 160 followed by a break of the support line beneath them. Technical patterns are descriptions of what has happened, not promises about what comes next, and a pattern that is widely discussed can attract as many traders betting against it as with it. Still, it is a useful vocabulary for describing why so many stops were sitting in the same place.

EUR/USD: the hike that did not help

EUR/USD opened at 1.1617 and closed at 1.1602, down 0.13%. The weekly range was about 1.1574 to 1.1656. A central bank raising rates and its currency drifting lower is confusing if you think of rate decisions in isolation. Think of them instead as one data point in a long series of expectations: the ECB hike was fully expected, while the US core CPI beat added to the expected Fed path. Net effect: the rate gap moved slightly in the dollar's favour.

GBP/USD: waiting for the Bank of England

Cable opened at 1.3517 and closed at 1.3529, up 0.09%. Sterling has now spent three weeks in a narrow band in the mid-1.35s. With the Bank of England meeting next week, traders had little reason to take a strong view.

AUD/USD and NZD/USD

AUD/USD rose to 0.7241 early in the week before closing at 0.7173, down 0.49%. NZD/USD fell from 0.5882 to 0.5816. The Antipodean currencies did not share in the yen's strength, and the firmer US inflation data on Friday weighed on both.

USD/CHF: two havens, two directions

USD/CHF rose from 0.8100 to 0.8161, up 0.75%, while USD/JPY fell 1.7%. Both the yen and the franc are often lumped together as safe havens, but this week they did the opposite. The difference is monetary policy: the BoJ was expected to hike, while the Swiss National Bank's policy rate was at 0%. When a currency moves because of its own central bank, the safe-haven label is not much help.

Gold

Comex gold futures opened at 4,466.50 and closed at 4,408.90, down 1.29%, with a low of 4,333 on Friday. FinancialJuice reported gold up 0.6% at around $4,433 on Tuesday, so the early-week softness in the dollar helped briefly before rate expectations took over again.

Why "already priced" matters: a worked example

Here is a simplified, illustrative way to think about it. Imagine EUR/USD reflects, among many other things, the expected gap between ECB and Fed policy rates over the next year. Suppose at the start of the week traders expected the ECB deposit rate to average 2.70% over the next twelve months and the Fed funds rate to average 3.95%: a gap of 1.25 percentage points in the dollar's favour.

On Thursday the ECB raised rates to 2.50%, exactly as expected. The expected average barely changes, because the hike was already inside the 2.70% average. On Friday, core CPI beats by a tenth and the expected Fed average edges up to, say, 4.00%. The gap widens to 1.30 points. EUR/USD falls, even though the only central bank that actually acted this week was the ECB.

These numbers are invented to illustrate the logic, not estimates of real pricing. The real-world version is in the two-year bond yields of each country, which the market updates continuously. Our guide to how economic data moves forex covers the same logic for data releases.

What this week teaches

1. Holidays can amplify moves. USD/JPY broke 155 while US markets were closed. Thin liquidity means fewer orders to absorb a large flow, so moves can be sharper and spreads wider. Our guide to forex market hours and sessions covers how holidays change the trading day.
2. Expected decisions rarely move currencies on the day. The ECB hiked; the euro slipped. The move came before the meeting, while it was being priced in.
3. A tenth of a percentage point can matter. Core CPI at 0.3% instead of 0.2% sounds trivial. Four days before a Fed meeting that was close to a coin flip a fortnight earlier, it was not.
4. Safe havens are not a single asset class. The yen and the franc went in opposite directions because their central banks were in different places.
5. Size for the range you are seeing. Two consecutive weeks with ranges of three to five yen on USD/JPY mean a position sized for a normal week is oversized for this one. The position sizing guide shows how to recalculate lot size from your stop distance. Leverage magnifies losses as well as gains, and most retail CFD accounts lose money.

Scheduled next week (14–18 September)

The busiest central bank week of the quarter. Events on the calendar, listed for planning only:

• Monday 14 September: Canada CPI for August, around the start of the week.
• Tuesday 15 September: UK labour market data. China's August activity data. German ZEW economic sentiment.
• Wednesday 16 September: UK CPI for August. US retail sales for August. Federal Reserve decision at 2:00 p.m. Eastern, with new economic projections and a press conference by Chair Kevin Warsh. The ECB's new rates take effect.
• Thursday 17 September: Bank of England decision at noon UK time. Final euro-area HICP for August. Japan's national CPI for August, ahead of the BoJ.
• Friday 18 September: Bank of Japan decision at the end of its two-day meeting, followed by Governor Ueda's press conference.

Three G10 central banks in three days is unusual. If you trade around any of them, read our guide to order types first; stop orders can fill well away from your level when spreads widen around a decision. For the previous two weeks of this story, see the 31 August – 4 September recap.

Sources

• CNBC: yen hovers near seven-month high, dollar steadies (8 Sep 2026)
• FinancialJuice: yen strengthens as BOJ rate-hike bets rise (8 Sep 2026)
• FNNews: yen in the 152 range (8 Sep 2026)
• ECB: monetary policy decisions (10 Sep 2026)
• FXStreet: scattered gains for the euro after the ECB hikes as expected (11 Sep 2026)
• Trading Economics: euro slips as dollar holds firm ahead of US CPI (11 Sep 2026)
• BLS: Consumer Price Index, August 2026 (11 Sep 2026)
• InvestingLive: Fed dot plot backs hawks as Warsh tone rattles markets (16 Sep 2026)
• Yahoo Finance historical price data (major FX pairs, gold futures, dollar index)