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

1058 GMT - Final manufacturing PMIs for the eurozone for July were somewhat disappointing, Tomas Dvorak at Oxford Economics says in a note. The PMI was revised down slightly to 51.9, dragged by underwhelming readings in both Italy and Spain. Still, price pressure in both countries appeared to soften, Dvorak says. "This is consistent with our view of limited second round effects from the ongoing commodity shock that should keep the rise in core inflation moderate over the coming months," he says. However, this is unlikely to alter the European Central Bank's caution given continuing hostilities between the U.S. and Iran and the rebound in global energy prices. "We will put another 25bp rate hike back into our baseline for our August forecast update," Dvorak says. (don.forbes@wsj.com)

1016 GMT - Credit spreads, or the risk premium on corporate bonds, could widen over the coming months as financial conditions tighten, RBC BlueBay Asset Management's Mark Dowding says in a note. Markets are pricing in the risk of central banks increasing interest rates to tackle inflation, which could lead to a decline in available cash for investments, Dowding says. Lower liquidity combined with increased credit supply could result in "wider spreads and weaker credits becoming crowded out of the market altogether", he says. (miriam.mukuru@wsj.com)

1015 GMT - U.S. Treasury yields are expected to rise further with interest-rate hikes by the Federal Reserve coming later, BNP Paribas analysts say in a note. "We think the market will continue to question the Fed's credibility and push long-end yields higher," the analysts say. The Fed left policy rates unchanged last week, with three FOMC members dissenting in favor of a hike. BNP Paribas analysts continue to expect the Fed to deliver three hikes starting December. "All in all, we believe the FOMC is moving towards rate hikes, albeit with a reluctance similar to its hesitation in April to abandon its easing bias," the analysts say. (emese.bartha@wsj.com)

0944 GMT - While production and new orders rose in July, U.K. manufacturers are starting to feel the strain of higher energy prices, Matt Swannell at the ITEM Club says in a note. The manufacturing PMI fell to 51.9 in the month, from 52.5 in June. "We think the breakdown of the U.S.-Iran ceasefire early in the month and the uncertainty surrounding the future of the conflict has been a key drag on manufacturers' optimism," he says. Higher energy costs will likely weigh on the sector in the second half, despite output price inflation easing to a four-month low in July. "Just as with the wider economy, we anticipate that this relief will be temporary," he says. (don.forbes@wsj.com)

0943 GMT - The U.K. manufacturing sector remained on a solid footing in July, analysts at RSM UK says in a note. The manufacturing PMI fell to 51.9, from 52.5 in June, but signaled continued expansion as it remained above 50. Stronger new orders suggest the recovery extends beyond stockpiling ahead of the Iran war, the analysts say. "The manufacturing sector has grown roughly twice as fast as the rest of the economy since last summer." Meanwhile lower input-cost inflation has eased pressure on manufacturers, although renewed energy-price rises could weigh on growth ahead. Activity should expand further, supported by AI investment and rising global defense spending, alongside plans for reindustrialization and regional growth from Prime Minister Andy Burnham, they say. (don.forbes@wsj.com)

0943 GMT - U.K. short-dated government bonds, or gilts, are more favorable than their long-dated peers due to inflation concerns, RBC BlueBay Asset Management's Mark Dowding says in a note. Short-term yields look attractive given that BOE interest rates remain restrictive, reducing the possibility of a rate increase in the near term, Dowding says. Still, the risk of higher U.K. inflation from elevated energy costs and fiscal pressures could weigh on long-dated gilts, he says. Ten-year gilt yields fall 6.6 basis points to last trade at 4.971%, Tradeweb data show. U.K. 30-year gilt yields drop 6bps to 5.702%. (miriam.mukuru@wsj.com)

0941 GMT - U.S. Treasury yields and the dollar fall in European trade. President Trump's decision to resume diplomatic talks with Iran causes oil prices to drop, lowering yields as inflation worries ease. The dollar falls on reduced demand for safe-haven assets, and also following U.S.-Japanese coordinated currency intervention to firm the yen. "The prospect of renewed coordinated action could cap any recovery in the greenback [dollar] against the yen," said Exness' Dat Tong.The 10-year Treasury yield declines 5.7 basis points to 4.687%, according to Tradeweb. The DXY dollar index falls 0.1% to 99.823. (emese.bartha@wsj.com)

0936 GMT - Indonesia's external trade performance is expected to remain under pressure in 2H, with monthly trade deficits likely to persist as imports continue to outpace exports, RHB economist Wong Xian Yong says in a note. The outlook is expected to be shaped by three key factors: an uneven recovery in global commodity markets, evolving U.S. trade policies and tighter domestic supply management, he says. Coal and palm oil should remain relatively resilient, supported by regional demand and Indonesia's B50 biodiesel mandate, while nickel exports are likely to remain constrained by global oversupply, he reckons. Wong expects domestic policies to play a larger role in shaping export performance for the rest of the year. (yingxian.wong@wsj.com)

0936 GMT - The euro should probably be stronger versus the dollar given recent solid eurozone data, lower oil prices and dollar selling from Japan as part of joint interventions with the U.S. to support the yen, ING's Chris Turner says. This is probably due to media reports that U.S. authorities were checking rates in, and possibly selling, the euro versus the yen on Friday, he says. The U.S. Treasury might have sold euro-yen to avoid having to explain why it was selling the dollar, Turner says. The euro trades flat against the dollar at $1.1525, having hit a six-week high of $1.1558 overnight, according to LSEG. The euro falls 0.7% to 180.85 yen after reaching an eight-month low of 179.36 yen overnight.(renae.dyer@wsj.com)By Emese Bartha and Renae Dyer Treasury yields and the dollar fell after President Trump abandoned plans to strike Iran and said talks with the country will resume Monday, while the currency was also hit by a U.S.-Japanese joint intervention to strengthen the yen.

Key to any success in the talks will be whether the Strait of Hormuz can be reopened for safe shipping, paving the way for eventual talks on Iran's nuclear program.

"Markets are starting August with a rare dose of geopolitical relief, as Trump's decision to restart talks with Iran has knocked a large chunk out of the oil-risk premium and given bonds room to rally," Patrick Munnelly, market strategist at the Tickmill Group, said in a note.

The fresh de-escalation in the Middle East prompted a sharp fall in oil prices. Brent crude last traded 4% lower at $84.41 a barrel. This helped Treasury yields to decline by up to 6 basis points across the curve. The two-year Treasury yield fell 3.9 basis points to 4.251% and the 10-year yield declined 5.5 basis points to 4.689%.

"But the move is not a full all-clear: reopening the Strait of Hormuz is still a negotiation rather than a fact," Munnelly said.

European bond yields fell along with their U.S. counterparts. The 10-year German Bund yield dropped 4.4 basis points to 3.157%, while the 10-year U.K. gilt yield fell 7 basis points to 4.976%, according to LSEG data.

The DXY index, which measures the dollar against a basket of currencies, fell 0.1% to 99.805, having hit a seven-week low of 99.418 overnight, as progress in the Middle East reduced demand for safe havens. The dollar was also pushed lower by U.S. and Japanese authorities confirming joint intervention to support the yen last week.

The Japanese-U.S. intervention, the first joint move to shore up the yen since 1998, has discouraged investors from betting on the Japanese currency weakening and bought time, strategists at Morgan Stanley said in a note.

"But it is unlikely to reverse broad yen weakness without lower U.S. rates and weak financial conditions simultaneously," they said.

The dollar's decline Monday was relatively contained as markets continued to bet on the Federal Reserve raising interest rates by year-end.

Pricing for a September U.S. rate rise recovered to 17 basis points Monday from 10 basis points after the Fed's meeting last week damped expectations for a hike, according to LSEG data. A 25 basis-point increase by December was fully priced.

This week's data will be key to shape the Fed's next step. The release of the all-important U.S. nonfarm payrolls report on Friday will be preceded by other labor market data and ISM surveys beforehand.