DXY Firms to 98.93 as Treasury Yields Slip; Sterling Near Highs

The US Dollar Index sits at 98.9340, up 0.20% against the prior New York close, though the session is still open — roughly three hours from today's 17:00 New York close, so the move can still shift into the close. The index has been trading in a stretch of dollar softness tied to the US Treasury's August 19 decision to expand its long-term bond-buyback program, which has pulled yields and the dollar lower against G10 currencies over the past week. Equities were mixed on the last completed session: the S&P 500 slipped 0.24%, the Nasdaq fell 0.60%, and the Dow added 0.19%, while the VIX jumped 4.49% to 15.81. Gold rose 0.71% to 4636.67.

US Treasury yields eased across the curve on the day: the 10-year fell 3.8bp to 4.700%, the 30-year dropped 4.7bp to 5.229%, the 5-year eased 1.9bp to 4.405%, and the 3-month slipped 0.3bp to 3.707% (Yahoo reference). The Fed funds target remains 3.50-3.75%, and the live 2026 policy question is whether the Fed hikes rather than cuts. Minutes from the July 28-29 FOMC meeting, released August 19, showed the Committee held 9-3, with three dissenters preferring a quarter-point hike and many participants judging further tightening might be needed if inflation didn't ease. The US Treasury's August 19 move to expand its long-term bond-buyback program has also been a factor pulling yields lower.

EUR/USD trades at 1.1659, down 0.15%, holding near its best level in roughly three months after Monday's close near 1.1682. GBP/USD is at 1.3629, down 0.11%, sitting close to a roughly six-month high following Monday's close near 1.3638. USD/JPY trades at 159.16, up 0.11%, with the yen underpinned by market pricing of roughly 82-84% odds of a 25bp BOJ hike to 1.25% at the September 17-18 meeting (per Reuters/Bloomberg BOJ-odds reporting). USD/CAD is at 1.3857, up 0.66%, with CAD weighed down by the escalating US-Canada trade dispute after 50% US tariffs on roughly $20bn of Canadian goods took effect August 22.

GBP/USD trades at 1.3629, down 0.11%, after closing Monday little changed near 1.3638 — still close to its strongest level in roughly six months. Sterling strength has been tracking broader dollar weakness since the US Treasury's August 19 announcement that it would at least double its longer-dated bond buyback operations, from $2bn to at least $4bn per operation, effective September 9. On the UK side, ONS data released August 19 showed CPI accelerating to 2.9% y/y in July (core 2.6%), while the ILO unemployment rate stood at 4.9% for April-June. The Bank of England held Bank Rate at 3.75% in July, with no new MPC decision this week; the next meeting is September 17.

Tuesday's calendar is data-light but broad. Japan's BOJ Core CPI y/y (15:00, forecast 1.4%, previous 1.5%) leads, followed by Germany's Final GDP q/q (16:00, forecast 0.2%, previous 0.2%) and the German ifo Business Climate (18:00, forecast 87.2, previous 86.6). US releases follow late session: the ADP Weekly Employment Change (22:15, previous 9.5K), a speech from FOMC Member Barkin (22:30), Belgium's NBB Business Climate (23:00, forecast -11.0, previous -11.9), US HPI m/m (23:00, forecast 0.2%, previous 0.3%).