USD Surges as Treasury Yields Climb, GBP and EUR Falter.

  • USD Surge: The US Dollar strengthened as 10-year Treasury yields hit their highest since July, driven by expectations of slower Federal Reserve rate cuts and potential inflation risks.
  • Speculation on Yields: Market talks suggest the 10-year yield could reach 5%, influenced by concerns over rising inflation, fiscal spending, and increased bond issuance.
  • Kashkari’s Outlook: Minneapolis Fed President Neel Kashkari foresees “modest” rate cuts but warns the Fed could accelerate cuts if the labor market weakens.
  • GBP/USD Bearish Bias: GBP/USD shows bearish momentum, consolidating within a descending channel, with potential downside toward the 1.2810–1.2665 range.
  • EUR/USD Under Pressure: EUR/USD remains in a bearish phase due to weak German producer prices, ECB easing expectations, and the Dollar’s continued strength.

USD: The US Dollar surged across the board overnight, driven by a sharp rise in US Treasury yields. The 10-year yield reached its highest level since late July, breaching the 4.2% mark during Asian trading. This upward movement reflects growing market expectations that the Federal Reserve’s easing of monetary policy will be slower than previously anticipated. Additionally, speculation is building that the 10-year yield could approach the 5% mark, spurred by inflation concerns and increased US fiscal spending. Minneapolis Fed President Neel Kashkari noted overnight that he foresees “modest cuts” in interest rates over the coming quarters to bring rates closer to a neutral level, but emphasized that the timing and scale of these cuts will be data-dependent. Kashkari also warned that if significant weakness in the labor market appears, the Fed may have to cut rates faster than currently expected.

GBP: GBP/USD regained some ground, trading around 1.3000 during Tuesday’s Asian session. However, technical indicators suggest bearish momentum for the pair. The daily chart shows GBP/USD consolidating within a descending channel, with the MACD indicator positioned bearishly and the RSI below 50, reinforcing the downtrend. On the downside, GBP/USD could test the lower boundary of the channel around 1.2810, with a break below potentially pushing it towards a three-month low of 1.2665. On the upside, resistance could be found around the 1.3040 level, with a break higher allowing the pair to approach 1.3100.

EUR: EUR/USD entered a bearish consolidation phase during Tuesday’s Asian session, hovering around 1.0820, just above the previous day’s low. Bearish traders are still in control, as the path of least resistance seems downward. German producer prices, which fell for the first time in seven months in September, fueled expectations for further European Central Bank (ECB) monetary easing. This, combined with the bullish US Dollar, suggests a negative near-term outlook for EUR/USD. Rising US Treasury yields and persistent geopolitical risks are also adding to the Dollar’s strength, reinforcing the downward pressure on the Euro. With no major Eurozone economic data due Tuesday, attention will shift to US data and Fed-related events for further guidance.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.