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

0955 GMT - The U.K. economy should deliver around 0.4% growth in the second quarter, as strong momentum from the first quarter and consumers smoothing through higher inflation help support solid growth, says Thomas Pugh, chief economist at RSM U.K. That resilience means the economy has grown twice as quickly in the last 18 months as the previous two years, he says in a note. Pugh expects GDP to grow 0.1% in June, with industrial production gaining 0.6%, as mining activity unwinds its May decline. Manufacturing output is set to hold steady, while construction activity drops around 0.5%. Further ahead, business surveys improved in July though inflation will rise in the second half of the year, slowing activity, he says. (edward.frankl@wsj.com)

0951 GMT - The cost of default protection for euro-denominated investment-grade credit stays unchanged as investors await further updates on the U.S.-Iran peace talks. The U.S. said that negotiations with Iran to end the Middle East conflict were proceeding well and that the two nations were close to reaching an agreement. "Markets have seen plenty of false dawns throughout this conflict, so plenty of attention will be on whether a deal is announced imminently and its details," Deutsche Bank Research strategists say in a note. The iTraxx Europe Main Index of euro IG credit default swaps is unchanged at 51 basis points, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)

0950 GMT - China's inflation likely eased to 0.7% on year in July from 1.0% in June, BofA Securities economists write in a note. A higher base for nonfood prices last year likely weighed on the headline CPI figure, they say. That's despite a smaller drag from food prices as pork prices rebounded sharply, rising 7.3% on month, the economists note. Meanwhile, the producer-price index likely rose 3.9%, slowing from June's 4.1% increase, they say. That reflects softer producer goods prices amid a sequential decline in coal and ferrous-metal prices, they add. (tracy.qu@wsj.com)

0945 GMT - This week's U.S. labor market data are an important driver for rates and the dollar, MUFG Bank analysts says in a note. "While day to day prices in crude oil are unpredictable what is certainly more consistent is the lack of any inflationary pressures stemming from the U.S. labor market." This was evident in Tuesday's job openings and labor turnover survey on Tuesday which implied little upward pressure in wages, the analysts say. Such limited domestically-generated inflation pressures should help contain rates, they say. ADP private payrolls data will be released at 1215 GMT followed by the key nonfarm payrolls report Friday. The DXY dollar index trades steady at 99.875. (renae.dyer@wsj.com)

0937 GMT - Final PMIs for the eurozone services sector made for positive reading, Nicola Nobile at Oxford Economics says in a note. In Italy and Spain--the two large eurozone economies that don't release a flash estimate--activity jumped in July, while the overall composite index rose to an eight-month high. "This was particularly evident in Spain, where the composite PMI reached a multi-year high," Nobile says. Pricing data also looked positive, with soft selling prices reinforcing Oxford Economics's view of limited second-round effects from the energy crisis. Still, the geopolitical backdrop remains volatile. "The coming weeks will be crucial in determining whether this momentum proves short-lived or is set to last longer than expected," she says. (don.forbes@wsj.com)

0935 GMT - U.S. Treasury yields decline in European trade as investors remain optimistic about a potential deal that could lead to the reopening of the Strait of Hormuz. The dollar trades steady, awaiting further Middle East developments. Hopes that the diplomatic process between the U.S. and Iran could be revived and an agreement possibly reached could weigh on the safe-haven currency, says DHF Capital S.A's Bas Kooijman in a note. However, the lack of tangible progress and ongoing threats to shipping in the region "continue to fuel uncertainty and support safe-haven demand," he says. The 10-year U.S. Treasury yield falls 1.6 basis points to 4.609%, according to Tradeweb. The DXY dollar index is flat at 99.89. (emese.bartha@wsj.com)

0927 GMT - Indonesia's GDP growth could moderate to 5.1% in 2H from 5.45% in 1H as tighter monetary conditions, softer high-frequency indicators and persistent external headwinds gradually weigh on domestic activity, RHB's Wong Xian Yong writes. However, the economist raises his 2026 growth forecast to 5.2% from 5.0% following stronger-than-expected 2Q GDP growth. He expects moderating commodity prices, weaker external demand and continued trade uncertainty to constrain exports, while investment-related demand should keep imports relatively resilient. That will likely continue to pressure the trade balance, leaving Indonesia increasingly reliant on domestic demand, he says. Resilient household consumption, supportive fiscal policy and sustained investment should underpin growth, while weaker external demand remains the key risk to RHB's 2026 growth outlook. (yingxian.wong@wsj.com)

0926 GMT - A potential U.S. expansion of restrictions on Chinese optical modules could affect a broader range of data-center networking equipment and supply chains, according to research firm TrendForce. The firm says it is too early to view the proposal as a blanket ban, as key details such as product scope, vendor definitions and any transition period remain unclear. While U.S. customers are unlikely to quickly replace Chinese manufacturing capacity, policy pressure could drive cloud-service providers to diversify sourcing outside China. The bigger concern, TrendForce says, is whether networking equipment containing Chinese components will be able to secure FCC approvals and remain on approved supplier lists. (jie.yang@wsj.com)

0919 GMT - The Japanese yen faces renewed falls unless the Bank of Japan accelerates interest rate rises and the Federal Reserve refrains from raising rates, ING's Chris Turner says in a note. Following last week's joint U.S.-Japanese intervention to support the yen, Treasury Secretary Scott Bessent said he was confident the Bank of Japan would tighten policy. His comments imply the BOJ could raise rates earlier than expected in September in exchange for the joint intervention, Turner says. This might cement the peak in dollar versus yen if the Fed also keeps rates steady, he says. The dollar trades flat at 157.74 yen, having reached a three-month low of 155.21 Monday and a 40-year high 163.98 on July 23, LSEG data show. (renae.dyer@wsj.com)

0841 GMT - Fixed-income investors should avoid making a single macro call and instead use diversification and active management to build portfolios capable of performing across a range of scenarios, Aviva Investors' Fraser Lundie says in a note. "In a world where easy gains are harder to find, diversification, active management and flexibility become even more valuable," the global head of fixed income says. The global cycle is uneven and dispersion is widening, he says. "Central banks are pivoting away from easing, but there will be significant variation in the strength and pace of central bank policies, depending on their governments' fiscal positions and exposure to energy prices." Overall, policy remains on a gradual path, with growing focus on central bank direction through the second half of the year. (emese.bartha@wsj.com)

0828 GMT - Yields on U.K. 2-year government bonds, or gilts, drop to their lowest since July 10, as investors cut expectations of the Bank of England rate rises. The U.S. said talks with Iran to end the Middle East conflict are progressing well, calming fears about possible escalation in the war. Oil prices dropped on Tuesday following reports about the U.S.-Iran talks, easing inflation concerns. Two-year gilt yields are down 1.4 basis points to last trade at 4.236%, having dropped to 4.225% earlier in the session, Tradeweb data show. Markets price in an 88% chance of a 25 basis-point BOE rate rise by December, down from a 99% probability priced in on Monday, LSEG data show. (miriam.mukuru@wsj.com)

0827 GMT - Indonesia's economic growth is expected to moderate in 2H rather than accelerate from the 5.45% recorded in 1H, ANZ Asia economist Krystal Tan says in a note. She raises her 2026 GDP growth forecast to 5.2% from 5.0% after stronger-than-expected 2Q growth, supported by robust investment and government spending. Government support and policy-directed investment are expected to remain the main growth drivers, including targeted fiscal measures and Danantara-backed initiatives, she says. However, Tan says the government's 5.6%-6.0% growth target looks difficult to achieve as private demand remains cautious amid softer household sentiment, limited formal job creation and policy uncertainty. Weak external demand and a drier-than-normal dry season linked to El Nino are also expected to weigh on growth through weaker agricultural output and higher food prices.