DXY Slips to 98.44 as Yen Leads, ECB Hike Decision Looms

The US Dollar Index is at 98.4440, down 0.34% in a session that is still trading — this reading comes about three hours ahead of today's New York close, not a final print. The slide is being led by the yen, with USD/JPY off 0.34%, while EUR/USD (+0.13%), GBP/USD (+0.14%) and USD/CAD (+0.15%) are all firmer. Treasury yields ticked up modestly across tenors — 3-month +3.5bp to 3.810%, 5-year +2.9bp to 4.602%, 10-year +2.3bp to 4.829%, 30-year +1.8bp to 5.282% — even as US equities softened (S&P 500 -0.35%, Dow -0.57%, Nasdaq -0.55%) and the VIX rose 3.31% to 16.24. Global benchmarks fell harder: FTSE 100 -1.03%, DAX -1.17%, Nikkei 225 -1.08%. Gold (+1.39%) and Brent crude (+2.99%, near $100) both advanced.

The Fed funds target remains 3.50-3.75%, and per the policy anchors the live 2026 question is whether the Fed hikes — not whether it cuts. A Reuters poll cited in today's headlines finds the Fed is expected to hold rates steady for the rest of 2026, though a rising number of analysts now see at least one hike. Treasury yields nudged higher across the curve on the day — 3-month +3.5bp, 5-year +2.9bp, 10-year +2.3bp, 30-year +1.8bp — modest moves rather than a large repricing. A CNBC headline captured the debate directly: the Fed is being pushed toward lower rates even as some experts argue consumers may be better off with a hike. US Core PPI, PPI and weekly jobless claims are due later today and will feed directly into that debate.

EUR/USD: 1.1638, +0.13%, firming as traders position into today's ECB decision. GBP/USD: 1.3558, +0.14%, holding near the top of its range after Wednesday's gilt-market stress. USD/JPY: 153.47, -0.34%, extending the yen's rally as markets brace for a possible Bank of Japan hike at the September 17-18 meeting. USD/CAD: 1.3803, +0.15%, with the loonie's Brent-driven tailwind offset by dollar demand tied to the Canada-US tariff dispute.

GBP/USD trades at 1.3558, up 0.14%, building on Wednesday's session, when the pair firmed to around 1.3546 (vantagemarkets) after the 30-year gilt yield hit its highest level since 1998. That bond-market pressure has roughly halved Chancellor John Healey's fiscal headroom ahead of the October 28 budget. Dollar strength from the strong US August payrolls print — 162,000, well above the roughly 53,000 forecast, released Friday September 4 — and Brent crude's push toward $100 after reported strikes on Saudi energy facilities were offsetting factors. On rate expectations, a September 7 analysis said the Bank of England has largely ruled out a September hike, with Chief Economist Huw Pill striking a hawkish tone not shared by the wider Monetary Policy Committee; at the July 30 meeting the MPC held Bank Rate at 3.75% by a 6-3 vote. Today's calendar brings UK real-time economic indicators from the ONS, plus US jobless claims and producer prices.

German Final CPI m/m at 16:00 (forecast 0.2%, previous 0.2%). Italian Industrial Production m/m at 18:00 (forecast 0.3%, previous -1.0%). The ECB's Main Refinancing Rate decision and Monetary Policy Statement at 22:15 (forecast 2.65%, previous 2.40%), followed by the ECB press conference at 22:45. US Core PPI m/m at 22:30 (forecast 0.3%, previous 0.2%), headline PPI m/m (forecast 0.4%, previous 0.0%), and weekly Unemployment Claims (forecast 205K, previous 206K), also at 22:30.