Intro
MUFG's head of research for global markets in EMEA takes questions from the bank's head of UK, Ireland and Swiss FX corporate sales on how hawkish Warsh's Jackson Hole speech really was, why the dollar debasement theme faded as quickly as it arrived, what Deputy Governor Himino's speech did to Bank of Japan pricing, and why the currency market has shrugged at the breakdown of the US-Canada trade deal.
Host: Derek Halpenny, head of research, global markets, EMEA and international securities, MUFG
Also on: Simon Mayes, head of UK, Ireland and Swiss FX corporate sales, MUFG, who poses the questions
Published: 28 August 2026 on The MUFG Global Markets Podcast
Key Takeaways
The market went into Jackson Hole underpricing September, and Warsh's language argues for repricing
Eight to nine basis points of hike pricing before the speech, around 50/50 after it, with core PCE at 3.3%
"In any normalish world, the market would very quickly be priced for a hike on the 16th of September." — Derek Halpenny
Dollar debasement is a real theme that historically does not last
"dollar debasement episodes tend to be quite fleeting" — Derek Halpenny, on a study of episodes back to 2015
The move up in real yields looks like AI capital demand rather than fiscal risk
"that's not the recipe for a sustained dollar depreciation" — Derek Halpenny
Halpenny expects the dollar index to grind back to its 19 August high and on toward 100
Himino's speech was hawkish enough to leave September Bank of Japan pricing exactly where it was, which Halpenny reads as the deputy governor endorsing it
MUFG expects hikes in September and again in January 2027, but nothing in December
The Canadian dollar sell-off is contained because the tariffs that actually took effect are small
About 5% of Canadian exports to the US now, against retaliatory auto and light-truck tariffs on a much larger share from 1 January 2027
Jackson Hole: Why the Market Was Underpricing September Going In
Mayes opens on Jackson Hole, saying the week has been building to it while noting the symposium's record of anticlimax
"Always, you know, always a lot of focus on Jackson Hole, but most of the time it doesn't really have too much impact." — Simon Mayes, who asks how surprising Warsh's speech was
Halpenny's first point is the starting position: the market carried only eight to nine basis points of pricing for a September hike into the speech, which he thought was on the low side given inflation alone
He cites core PCE at 3.3%
On the speech itself, he says the inflation language was not hugely surprising, and picks out two words as the market-moving part
Warsh's wording, as Halpenny relays it: "we have work to do if inflation not moving to 2% with speed"
It is the "with speed" that may spook markets into reconsidering September, because inflation plainly is not moving toward target with speed
He also relays Warsh saying he is "hard-pressed to say financial conditions are restrictive and inflation data doesn't suggest trend meaningfully improved"
Put together — full employment, inflation above target and not falling, financial conditions that are not restrictive — Halpenny says the conclusion should be mechanical
"In any normalish world, the market would very quickly be priced for a hike on the 16th of September." — Derek Halpenny
Pricing is still only around 50/50, and he accepts why: a payrolls report and another set of CPI figures land before the FOMC meeting, and the holdouts will point to them
His answer to the holdouts is that a downside CPI surprise would need weak payrolls behind it to count, and even then some would dismiss it as one data point against inflation that is still sticky and still above target
He expects a continued gradual grind toward hike pricing, and says the dollar's move is understandable in that context, with further upside possible short term
The Debasement Trade, and the Study MUFG Ran on It
Mayes raises dollar debasement as the story that owned the tape until this week
"dollar debasement has been the buzzwords, if you like, for a little while" — Simon Mayes, who says it seems to have faded since Jackson Hole
Halpenny answers with the desk's own work rather than a view: they took data back to 2015, used averages and z-scores to isolate sudden extreme moves of a weaker dollar and higher gold, then looked at what Treasury yields did around them
The finding is that these episodes have a short half-life when rates are rising
"dollar debasement episodes tend to be quite fleeting" — Derek Halpenny
Where rates fall instead, the theme can extend and produce bigger dollar moves — though he treats that version as more cyclical than structural
On what is actually driving real yields higher, he checked the fiscal explanation and found no support for it
Sovereign spreads show no deterioration in fiscal risk, and inflation expectations are relatively stable
"So it looks more like it's AI-related capital demand." — Derek Halpenny
"that's not the recipe for a sustained dollar depreciation" — Derek Halpenny
He puts levels on the dollar call, dating the recent high to 19 August
"if you look back to the buyback announcement on the 19th, the DXY high in the day was, I think, 99.70, 99.75. We're trading 99.50 now." — Derek Halpenny
He expects the index to retake those levels, and then "we can certainly grind up to the 100 level on DXY"
The Bank of Japan After Himino: Still September, and Not Every Three Months
Mayes asks what a firmer dollar means for the dollar against the yen, flagging Deputy Governor Himino's speech earlier in the week and the intervention the Ministry of Finance has confirmed between July and August
Halpenny's answer goes to policy rather than to the pair: there was a little disappointment that nothing more explicit came on timing, though he was not expecting it with roughly three weeks still to run to the meeting
The speech was hawkish enough to leave his pricing untouched
"it was hawkish enough for me to keep the pricing as it was, which is roughly 80% probability of a hike in September" — Derek Halpenny
He reads unchanged pricing after a speech by the deputy governor as a signal in itself
"the fact that the pricing remained the same is an effective endorsement from one of the most senior members of the BOJ, the deputy governor, on the current market pricing" — Derek Halpenny
Himino's own framing was a driving analogy, which Halpenny takes as the pace picking up rather than a commitment
"he was using an analogy of a foot on the accelerator in terms of speeding up the pace of tightening" — Derek Halpenny
"when you're below neutral you can put the foot down", with external factors and risks meaning you may have to adjust the pedal
The caution attached to it is that nobody should assume hikes every three months just because June was followed by September
MUFG's own path: a September hike, no move in December, and another in January 2027
That is faster than the Bank's earlier pace and gets it to neutral, "which is probably 1.75 to 2 on nominal rates, which we would definitely envisage seeing in 2027"
Canada: A Small Tariff Now, a Much Bigger One Waiting on 1 January
Mayes says he found it interesting that the sell-off has been so well contained despite the trade deal between the US and Canada breaking down, and asks why
Halpenny's first answer is the size of what actually happened: the tariffs that took effect cover only "about 5% of Canadian exports into the US"
The Canadian dollar has fallen against the US dollar, but the move is contained because the trigger was small
The escalation that matters is next year's: retaliatory tariffs on autos and light trucks are due to take effect on 1 January 2027
He is explicit that a threat with a three-month fuse is not a tradable event
"you don't trade Trump today on something he's threatening in three months' time, because it's all part of the negotiation process" — Derek Halpenny
What would change that is the market starting to believe the January tariffs are real: 25% up to 50%, on what he thinks is "like between 10 and 15% of exports"
On valuation he thinks the currency has further to fall regardless, because the pair overshot last week on expectations of a deal
Some of that has already retraced, and on relative macro and rate spreads, "based on relative macro we should already be north of 140" — Derek Halpenny
If things worsen he expects that level and potentially "getting up towards the mid-140s if these tariffs are implemented"
He closes the point by saying it still needs a couple of months to play out
Halpenny's week ahead is hawkish on both sides of the Pacific and constructive on the dollar with it: a Fed he thinks the market will keep repricing toward a September hike, a Bank of Japan he still expects to move in the same month, a debasement story he expects to keep fading while rates rise, and a Canadian dollar that he thinks is too strong before the tariffs that would really hurt it have even arrived.
Products, Companies & Tools Mentioned
MUFG's dollar debasement study (The desk's screen back to 2015, using averages and z-scores to pick out sudden moves of a weaker dollar and higher gold and then check Treasury yields; the conclusion is that these episodes are fleeting when rates are rising)
DXY (The dollar index Halpenny uses to frame the whole dollar call — a 19 August high of 99.70 to 99.75, 99.50 as the podcast records, and a grind toward the 100 level from there)
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