The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0834 ET - Artificial intelligence looks to be driving a mild productivity upturn in Europe, Oxford Economics' Leo Barincou says. "AI's productivity impact on Europe's economy is real, growing, and increasingly visible at the macroeconomic level, though it remains modest," he says in a note. Data suggests an upper-bound productivity boost of 0.1% a year since 2023, around a fifth of the overall 0.5% annual gain, he says. ICT productivity in the six most AI-ready EU countries outperform that in the six least ready by roughly 30% since early 2023, Barincou says. "We expect stronger productivity growth to continue, with subdued hiring as firms draw on hoarded labor and benefit from wider AI adoption and related labour savings," he says. (edward.frankl@wsj.com)

0830 ET - U.K. lending to consumers and businesses stayed resilient in August, indicating strong consumption and business investment, Pantheon Macroeconomics economists Rob Wood and Elliott Jordan-Doak say in a note. Net lending to private companies and households increased to 3.9 billion pounds in August, from a 0.1 billion pounds decline in July. Given the lending data, Pantheon Macroeconomics expect the U.K. economy to expand by 0.4% quarter-on-quarter in the third quarter of 2026. (miriam.mukuru@wsj.com)

0744 ET - It's another heavy Fedspeak day with Fed governors Michael Barr, Christopher Waller and Michelle Bowman, as well as New York Fed President John Williams all slated to offer their views on the economy. Deutsche Bank's economics team says it will monitor their speeches for any changes in tone regarding financial conditions in the wake of the sharp rise in bond yields, but all-in-all Fed officials seem to be "singing from he same hawkish hymnal." The economists expect two additional 25 bps hikes in December and March, though "a further tightening of the labor market, stubborn underlying inflation, or evidence that AI-related capital expenditure is broadening demand could bring an October hike into play." (patrick.sheridan@wsj.com)

0646 ET - Target will lower prices on nearly 2,000 items across home, apparel and accessories. The price cuts come after the retailer said in August that it had lowered prices on more than 10,000 items over the past 12 months and was planning to roll out additional price reductions over the remainder of the year. In home, price reductions extend to comforters and sheets, with prices across the bedding category 15% lower on average from last year. In apparel and accessories, Target lowers costs for items including long-sleeve tees and shoes, such as kids' rain and winter boots. "We're making it even easier for busy families to create moments of joy this fall," chief merchandising officer Cara Sylvester says. (connor.hart@wsj.com)

0623 ET - The dollar rises to a two-month high against a basket of currencies, extending recent gains on expectations for further U.S. interest-rate increases as soon as next month. The market currently prices a 73% chance that the Federal Reserve will raise rates by another 25 basis points in October, according to LSEG. The Fed raised rates by 25bps earlier this month and signalled further tightening. Since the decision, several Fed policymakers have pointed to the prospect of further rate rises to stem inflation as energy prices stay elevated amid the ongoing Middle East conflict. The DXY dollar index rises to as high as 101.487. (renae.dyer@wsj.com)

0600 ET - U.K. Treasury Chief John Healey on Monday reiterated the government's promise to maintain fiscal discipline, which has contributed to a modest decline in gilt yields, Mizuho's Evelyne Gomez-Liechti says in a note. "A government still keen to avoid fiscal credibility concerns remains supportive [for gilts]," she says. Speaking at the Labour Party conference, Healey said: "The Prime Minister and I are in lockstep that we will meet the fiscal rules. That we will maintain control of Britain's finances." Ten-year gilt yields fall 4.0 basis points to last trade at 5.392%, Tradeweb data show. (miriam.mukuru@wsj.com)

0536 ET - The euro falls to a three-month low against the dollar as markets price in a higher probability that the Federal Reserve will raise interest rates further in October compared to the European Central Bank. Markets price a 72% chance of the Fed raising rates 25 basis points next month compared to 46% for the ECB, LSEG data show. ECB President Christine Lagarde on Monday said the ECB should adopt a measured response given no evidence of second-round inflationary effects stemming from higher energy costs. "Her remarks confirm our suspicion that if one central bank hikes in October, it will be the Fed, and not the ECB, ING's Francesco Pesole says in a note. The euro falls to as low as $1.1333. (renae.dyer@wsj.com)

0534 ET - The Bank of England could raise interest rates in November in response to the energy price shock but this wouldn't necessarily strengthen sterling, Monex Europe analysts say in a note. "We are cautious about how much sterling can benefit from hikes forced by an energy shock that is simultaneously squeezing growth." Fiscal risks also linger ahead of the October 28 budget, they say. Treasury chief John Healey spoke about fiscal discipline but almost all headroom has been eroded. Still, sterling risks are two-sided until fiscal reality becomes fully apparent, they say. Prime Minister Andy Burnham will speak at the Labour Party conference at 1300 GMT. Sterling falls 0.2% to $1.3229. The euro trades flat at 0.8574 pounds. (renae.dyer@wsj.com)

0508 ET - Short-term price gains in gold and silver will likely be limited as long as the Federal Reserve "remains in inflation-fighting mode," Julius Baer's Carsten Menke writes. Rising U.S. bond yields have pressured the precious metals' prices, which Menke says is due to the real-yield component. This likely reflects the U.S. economy's strength, which could fuel fears of further Fed rate hikes, says the next generation research head. Still, precious metals' decline could be limited, as he expects the Fed to raise rates less frequently than currently priced into money markets. A higher rate environment typically weighs on nonyielding assets like gold. Spot gold rises 0.7% to $4,140.47 a troy ounce. (megan.cheah@wsj.com)

0441 ET - Japanese officials' comments this week continue to send a strong signal that Tokyo is prepared to intervene to support the yen, says MUFG's Lee Hardman. He reckons the remarks are stoking speculation that Japan will make other policy adjustments to provide more support for the currency, such as speeding up rate increases. The BOJ has already accelerated tightening and signaled that a faster pace will likely continue. MUFG expects the next hike in December, while the Japanese rate market is attaching a higher-than-normal probability to a back-to-back move next month. These developments are helping cap yen weakness even as the dollar strengthens broadly, and helping it outperform other G-10 currencies in the near term, says Hardman. The dollar is last flat at 157.42 yen. (fabiana.negrinochoa@wsj.com)

0438 ET - China's latest policy support pledge signals "greater policy urgency after months of soft economic data," ING's Lynn Song says in a research note. The K-shaped divergence of China's economy has widened in recent months, as exports remained the main source of strength, ING's chief China economist says. The State Council has vowed to accelerate policy support and bond issuance, stabilize investment and the property market, promote employment and income growth, and stimulate domestic demand. ING maintains China's 2026 economic growth forecast at 4.6%. (tracy.qu@wsj.com)

0435 ET - Shares of European semiconductor companies log gains a day after high bond yields pressured tech stocks globally. Shares of Dutch semiconductor-equipment maker ASML Holding and smaller rival ASM International are up 3.5% and 4%, respectively. BE Semiconductor Industries, the Dutch supplier of semiconductor assembly equipment, is up 3%. German chip maker Infineon Technologies stock gains 2.6%. STMicroelectronics shares are up 2.5%. Meanwhile, the E-mini Nasdaq 100 futures contract edged 0.1% higher, pointing to a positive opening for tech stocks in the U.S.