Dollar Slips 0.27% Even as Yields Jump — A Rare Decoupling

The Dollar Index trades 99.3490, down 0.27% in an incomplete session (roughly 14:00 New York, three hours from the close). That marks a pullback from the five-session run that carried the index from 98.72 to 99.63 following Fed Chair Warsh's hawkish Jackson Hole keynote on Friday, Aug 28. The notable wrinkle: today's dollar softness is happening alongside a broad rise in US yields — 10Y +8.4bp to 4.756%, 5Y +10.4bp to 4.500%, 30Y +6.4bp to 5.255%, 3M +6.2bp to 3.740%. Yields up, dollar down is not the usual pairing. The VIX rose 3.86% to 15.07, a mild pickup in equity-market caution alongside the moves in Treasuries and FX.

The policy backdrop: Fed funds target sits at 3.50-3.75%, and the live 2026 question is whether the Fed hikes further, not whether it cuts. That framing sharpened after Chair Warsh's Jackson Hole keynote warned inflation is running too high, said summer readings don't show underlying trends have meaningfully improved, and stressed the Fed's 2% target is "firm". Today's yield backup — 5Y leading at +10.4bp — is the kind of move that classically supports the dollar, yet DXY fell instead. On today's US calendar: FOMC Member Barr speaks at 23:05, and the Final Manufacturing PMI (forecast 53.3) lands at 23:45. The higher-impact ISM Manufacturing PMI and JOLTS data fall tomorrow, not today.

EUR/USD: 1.1615 (+0.29%), extending Monday's session in which the euro held gains and clawed back part of Friday's dollar-driven slide. GBP/USD: 1.3550 (+0.12%), sitting mid-range (1.35268-1.35652) in what looks like a broad-dollar bounce rather than a UK-specific move. USD/JPY: 159.69 (-0.25%), slipping back under the 160 level breached Monday, after Japan's Ministry of Finance confirmed record yen-buying spend of ¥15.39tn between Jul 30-Aug 26. USD/CAD: 1.3857 (-0.33%), with CAD supported by oil's rally (WTI +2.47% to 85.4970) and the softer dollar ahead of Wednesday's Bank of Canada decision.

EUR/USD trades 1.1615, up 0.29%, building on Monday's session in which the euro held modest gains and clawed back part of Friday's dollar-driven slide as German preliminary CPI for August accelerated. No ECB rate decision or FX intervention has been reported this week; the Governing Council's next meeting concludes September 10. Eurozone activity has firmed at the margin, with the HCOB composite PMI at 52.1 and manufacturing at 52.8 in August, while euro area HICP last printed 2.9% y/y in July. The pair now heads into a data-heavy Tuesday: Eurostat's flash HICP estimate for August (forecast 3.3% y/y versus 2.9% previous), core CPI (forecast 2.5%, unchanged from previous), and the July unemployment rate (forecast 6.3%, previous 6.3%) are all due later today — together the next real test of whether this euro firmness has legs beyond dollar softness.

Eurozone: flash CPI and core CPI estimates for August, unemployment rate for July, plus final manufacturing PMIs for Spain, Italy, France, Germany and the bloc, and German retail sales and Italian unemployment (all 16:00-19:00). UK: Nationwide HPI, final manufacturing PMI, M4 money supply, mortgage approvals and net lending to individuals (16:00-18:30). Switzerland: retail sales and manufacturing PMI (16:30-17:30). Japan: consumer confidence (15:00). US: FOMC Member Barr speaks (23:05), final manufacturing PMI (23:45). Canada: manufacturing PMI (23:30) ahead of Wednesday's BoC decision. Tomorrow (not today): US ISM Manufacturing PMI, JOLTS job openings, and the RBNZ rate decision.