Markets Wait on Trump-Xi as Brent Tests $100—AUD and CAD Break From the Pack

Today’s themes:

• Broad Dollar/FX: little conviction as markets wait for Wednesday’s flash PMIs and this week’s Trump-Xi summit; Dollar Index holding around 100.22 with its post-FOMC advance losing momentum.
• Oil: Brent fell to an 11-day low near $100 despite fresh Houthi attacks on Riyadh and Saudi Aramco’s Yanbu facility, as markets weight recovering Saudi export flows and diplomatic possibilities more heavily than the escalation premium.
• AUD: firming on its own domestic catalyst, all four major Australian banks now forecast a 25bp RBA hike to 4.60% at the September 28–29 meeting, following Governor Bullock’s hawkish September 18 testimony.
• CAD: moving the opposite way, losing commodity support as Brent falls, compounding an existing US-Canada yield-gap vulnerability.

Why it matters: Most of the currency market is simply waiting for this week’s diplomatic and data catalysts, but oil and AUD already have live, independent catalysts of their own. CAD isn’t really a third independent story, it’s largely a direct FX expression of the same oil move, which is why AUD and CAD stand out as the week’s clearest movers while everything else holds position.

Markets Hold Position as Diplomacy Takes Center Stage

Markets opened the week with two major geopolitical stories unresolved and relatively little conviction across FX. Dollar Index is holding around 100.22, with its post-FOMC advance losing momentum, while investors wait for Wednesday’s flash PMIs and, more importantly, the outcome of this week’s Trump-Xi meetings. At the same time, Brent has fallen toward the psychologically important $100 level despite fresh Middle East escalation, suggesting oil traders are for now assigning greater weight to recovering supply flows and the possibility of diplomacy.

There are two notable exceptions to the broader waiting pattern. AUD is being driven by increasingly hawkish RBA expectations, after all four major Australian banks converged on a September rate hike. CAD is moving in the opposite direction, losing support as oil retreats. The contrast leaves AUD and CAD with identifiable current catalysts while much of the rest of the currency market waits for this week’s political and economic events.

Trump-Xi: Better Pre-Summit Tone, but Markets Wait for Substance

Chinese President Xi Jinping will make a state visit to the United States from September 23 to 25, with his main meeting with U.S. President Donald Trump scheduled for Thursday in Washington. Trump is also expected to personally greet Xi at Joint Base Andrews on Wednesday before a formal White House program and Thursday’s state dinner. The visit will be Xi’s first U.S. state visit in more than a decade and the leaders’ second summit this year following Trump’s May visit to Beijing.

Expectations for a sweeping agreement are restrained. Trade remains central, particularly the existing tariff truce and China’s rare-earth exports, while artificial intelligence has emerged as another substantive agenda item. US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng held preparatory talks in New York on Sunday, where the U.S. proposed an AI dialogue and notification mechanism for major AI-related national-security incidents. The two sides also discussed possible tariff reductions on a limited group of non-sensitive goods, although Reuters reported no progress on several larger trade issues.

The tone going into the summit is nevertheless less confrontational than earlier this month. At the September G20 finance meetings, Bessent had been pressing China over trade imbalances and restrictions involving critical minerals. After Sunday’s discussions with He, the emphasis shifted toward preparing practical areas for dialogue. That does not establish that the underlying disputes have narrowed, especially around rare earths, trade and technology. It does suggest both sides are entering Thursday with an emphasis on managing differences rather than allowing them to dominate the pre-summit environment.

Summit Details at a Glance

• Xi’s state visit: September 23–25, main Trump meeting Thursday in Washington.
• Trump greets Xi at Joint Base Andrews Wednesday, followed by a formal White House program and Thursday’s state dinner.
• Xi’s first US state visit in over a decade; second Trump-Xi summit this year, after Trump’s May visit to Beijing.
• Agenda: the tariff truce, China’s rare-earth exports, and AI, including a proposed US-China AI dialogue and notification mechanism for major AI-related national-security incidents.
• Bessent-He Lifeng preparatory talks (New York, Sunday): discussed possible tariff reductions on a limited group of non-sensitive goods; no progress reported on several larger trade issues.

Brent Nears $100 Despite Fresh Saudi Attacks

Oil is delivering a more directional signal. Weekend escalation was significant: Houthi attacks targeted Riyadh and a Saudi Aramco facility at Yanbu, keeping threats to Saudi infrastructure and regional shipping firmly in view. Yet Brent still fell to an 11-day low near $100, with prices reaching around $100.20 at one stage on Monday.

The market is instead giving increasing weight to the supply-response and diplomatic channels. Saudi exports have recovered as producers adapt to damaged infrastructure and difficult shipping conditions, while ship-to-ship transfers near Oman have become a larger part of the workaround keeping Gulf crude flowing. Saudi exports recovered to just over 4 million barrels per day so far in September, while separate analysis showed ship-to-ship transfers rising materially as producers adjust to regional disruption.

At the same time, investors are watching for renewed diplomatic efforts around Iran during the UN General Assembly. Trump has said he would be open to meeting Iranian President Masoud Pezeshkian, while Iran has communicated conditions for re-engaging through mediators. Trump is also expected to meet Gulf Cooperation Council leaders on Tuesday, with the Iran conflict a major item on the agenda.

That leaves Brent around $100–100.26 as the clearest immediate market test. A decisive break would suggest that improving supply resilience and diplomatic possibilities are outweighing the latest escalation premium. Holding the zone and rebounding would show that the market is not yet prepared to discount the remaining regional risks. Either way, oil is providing a clearer verdict than most of the currency market.

Weekend Escalation vs. Supply Response

• Houthi attacks: targeted Riyadh and Saudi Aramco’s Yanbu facility over the weekend.
• Brent: fell to an 11-day low near $100, touching around $100.20 at one stage Monday.
• Saudi exports: recovered to just over 4 million barrels per day so far in September.
• Ship-to-ship transfers near Oman: rising materially as producers adjust to regional disruption.
• Diplomacy: Trump open to meeting Iranian President Pezeshkian; Trump-GCC meeting Tuesday with the Iran conflict on the agenda.

AUD Firms as Big Four Converge on RBA Hike

Australian Dollar is one of the clearest FX exceptions because its catalyst is domestic. CBA and ANZ joined Westpac and NAB on Monday in forecasting that the RBA will raise the cash rate by 25bp to 4.60% at its September 28–29 meeting. ANZ went further by retaining another November hike in its forecast.

The shift followed RBA Governor Michele Bullock’s September 18 testimony, when she said some of the upside risks to inflation appeared to be materialising. She highlighted renewed oil pressure, the Middle East conflict and the global AI investment boom as inflation risks, while questioning whether the current 4.35% cash rate is restrictive enough to return inflation to target. Markets had already moved heavily toward a September hike before the Big Four completed their convergence.

AUD therefore has a policy story of its own even while the broader Dollar complex waits for Trump-Xi and US data. The more important question has already begun shifting beyond September: whether 4.60% is sufficient or another hike to 4.85% becomes necessary.

RBA Hike Consensus

• CBA and ANZ joined Westpac and NAB Monday, all four now forecasting a 25bp hike to 4.60% at the September 28–29 meeting.
• ANZ also retains a further November hike in its forecast.
• Catalyst: Bullock’s September 18 testimony, upside inflation risks “materialising,” citing oil, the Middle East conflict and the AI investment boom, and questioning whether 4.35% is restrictive enough.

CAD Tracks Oil in the Opposite Direction

Canadian Dollar is the other clear exception, but for the opposite reason. As Brent falls toward $100, CAD is losing an important commodity support and has underperformed across the major currencies.

The oil move also reinforces an existing vulnerability. CAD had already been pressured by a widening gap between U.S. and Canadian bond yields, with the currency ending last week near its weakest levels since early August. Falling crude now adds a second headwind, making CAD a relatively direct FX expression of the market’s current willingness to reduce the Middle East energy premium.

That creates a useful contrast across FX: AUD is responding to a more hawkish domestic rate path, while CAD is responding to a softer commodity impulse. Most other major currencies lack an equally strong fresh catalyst.

AUD vs. CAD: Two Different Catalysts

Tuesday Through Thursday Could Break the Waiting Pattern

The sequence of events is unusually concentrated. Tuesday’s Trump-Gulf meeting gives oil the first diplomatic test. Wednesday brings flash PMIs across Germany, Eurozone, UK and US, while Xi arrives in Washington. Thursday brings the main Trump-Xi meeting, where trade, rare earths, AI and broader geopolitical issues are expected to feature.

Oil does not have to wait for that calendar. Brent’s $100–100.26 support test is already live, and a decisive move could feed quickly back through inflation expectations, bond yields and currencies.

For now, though, the market structure is unusually clear. The Dollar and most FX are waiting for the major diplomatic and data catalysts. AUD and CAD are not. One is being pulled by expectations of tighter RBA policy; the other by an oil market increasingly willing, at least for now, to price better supply resilience and the possibility of de-escalation.

Related Coverage

AUD & RBA Deep Dive

AUD/NZD Nears 1.25 as Big Four Align on RBA September Hike, Australian Jobs Data Comes Into Focus — more on the same Big Four convergence driving AUD today, including why the cross is technically stretched and what Australian jobs data need to show next.

Fed & Global Policy Watch

Goolsbee Challenges Fed’s “Look Through” Playbook as AI Demand Adds Inflation Risk — a Fed official’s view on the same oil and AI-driven inflation risks that are shaping both the RBA’s hawkish tilt and this week’s Trump-Xi agenda.

China’s 16-Month LPR Freeze Signals Diminishing Room for Broad Easing — the PBoC policy backdrop Xi brings into Thursday’s summit, with China’s own room for further easing narrowing.

Cross-Asset Watch

Gold Stalls Below 4,400 as Oil and Dollar Headwinds Fade—What Is Holding It Back? — how the same falling-oil, fading-Dollar backdrop driving today’s FX moves is playing out in precious metals.

FAQ

Why is Brent falling even after Houthi attacks on Saudi Arabia?

Markets are giving more weight to the supply-response and diplomatic channels than to the escalation itself. Saudi exports have recovered to just over 4 million barrels per day this month, ship-to-ship transfers near Oman are rising as a workaround, and Trump is due to meet Gulf Cooperation Council leaders Tuesday with the Iran conflict on the agenda.

Why are AUD and CAD moving while most of FX is flat?

Both have live, independent catalysts that don’t require waiting for this week’s PMIs or the Trump-Xi summit. AUD is responding to all four major Australian banks converging on a September RBA hike to 4.60%, while CAD is tracking falling oil, which compounds an existing US-Canada yield-gap vulnerability.

What would it take for the RBA to go beyond a September hike?

Governor Bullock’s September 18 testimony flagged renewed oil pressure, the Middle East conflict and the AI investment boom as inflation risks, and questioned whether 4.35% was restrictive enough. ANZ already has a further November hike to 4.85% in its forecast; whether that materializes depends on how those risks evolve after September’s move.

Key Takeaways

1. Most of FX has little conviction as markets wait for Wednesday’s flash PMIs and this week’s Trump-Xi summit, with Dollar Index holding around 100.22.
2. Brent fell to an 11-day low near $100 despite fresh Houthi attacks on Riyadh and Yanbu, as markets weight recovering Saudi export flows (just over 4 million barrels per day) and diplomatic possibilities more heavily than the escalation premium.
3. AUD firmed after CBA and ANZ joined Westpac and NAB in forecasting a 25bp RBA hike to 4.60% at the September 28–29 meeting, following Governor Bullock’s hawkish September 18 testimony.
4. CAD weakened as falling oil compounded an existing US-Canada bond yield gap, leaving the currency near its weakest levels since early August.
5. Brent’s $100–100.26 zone is the clearest live market test, while Tuesday’s Trump-Gulf meeting, Wednesday’s flash PMIs and Thursday’s Trump-Xi summit could break the broader waiting pattern across FX.

What to Watch Next

Tuesday’s Trump-Gulf Cooperation Council meeting for the first diplomatic test on oil. Wednesday’s flash PMIs across Germany, the Eurozone, UK and US, alongside Xi’s arrival in Washington. Thursday’s main Trump-Xi meeting on trade, rare earths and AI. And whether Brent’s $100–100.26 support zone breaks decisively or holds, which could feed quickly back through inflation expectations, bond yields and currencies before the week’s diplomatic calendar even plays out.