DXY Holds Near 101.3 as Yields Climb Ahead of Today's Core PCE

The Dollar Index sits at 101.31, up 0.38% in a session that's still open — it's roughly 14:00 in New York, about three hours ahead of the close, so today's move could still shift into the close. That builds on a multi-week advance: Tuesday's close saw EUR/USD fall to its weakest since May 2025 and sterling extend a four-session slide, both as US Treasury yields pushed toward their highest since 2007. The dollar bid looks broad rather than currency-specific, tracking yields higher across the curve as markets price a growing chance of a further Fed hike. Equities are softer today (S&P 500 -0.40%, Dow -0.56%, Nasdaq -0.20%) and the VIX is up 1.00% to 16.23, while oil has fallen sharply (WTI -3.42%, Brent -8.25%).

US Treasury yields are higher across the curve today: the 10-year is up 3.6bp to 5.276%, the 30-year up 4.0bp to 5.601%, the 5-year up 2.9bp to 5.097%, and the 3-month bill up 3.3bp to 4.090%. That builds on Tuesday's close, when the 10-year touched its highest level since 2007 at 5.24%. The policy backdrop: the Fed lifted its target range 25bp to 3.75-4.00% on September 16 — the first hike since 2023 — and most officials project at least one more hike this year; the live question is further tightening, not cuts. Markets were pricing roughly a 70% chance of an October hike as of Tuesday, up from 57% a week earlier, per Yahoo Finance. Musalem said the prospect of the Fed pulling too far back on its communications poses a volatility risk, per Reuters.

EUR/USD is at 1.1316, down 0.49% today, after Tuesday's close left it at its weakest since May 2025 as the ECB's measured, meeting-by-meeting pace lags rising US yields. GBP/USD is at 1.3205, down 0.37%, extending a slide that's taken it down 2.35% over the trailing month even against hawkish BoE rhetoric. USD/JPY is at 157.49, up 0.08%, holding near 157 after Japan's Finance Minister Katayama repeated that yen weakness is a problem. USD/CAD is at 1.4198, up 0.17%, with a widening Bank of Canada-Fed rate gap and US-Canada tariff friction keeping the pair bid; Canada observes a bank holiday today.

GBP/USD is at 1.3205, down 0.37% today. Tuesday's close saw it fall as much as 0.38% intraday to the same level, off a 1.3258 peak, as the 10-year Treasury yield pushed toward its highest since 2007 near 5.24%. That marked a fourth straight down session since around September 24, with sterling down 2.35% over the trailing month. The rhetoric hasn't been dovish: BoE Governor Bailey said on September 25 that persistently high energy prices make it harder to maintain the current rate stance, though pass-through to inflation has stayed quite subdued so far. On September 29, MPC member Catherine Mann called inflation staying above 2% an equality problem, while external member Alan Taylor said the case for a hike is not compelling unless energy prices stay elevated. Today's UK calendar brings Final GDP, the Current Account and FPC minutes.

Later today (Sydney time): German import prices and retail sales at 16:00, followed by German preliminary CPI at 16:29 — an ECB inflation input — plus French and Italian preliminary CPI readings. The UK releases its Current Account, Final GDP q/q (forecast 0.4%) and Revised Business Investment q/q at 16:00, with FPC Meeting Minutes and Statement at 19:30. Canada observes a bank holiday. The US slate runs from 22:15: ADP Non-Farm Employment Change (forecast 73K, prior 38K), then at 22:30 the Core PCE Price Index m/m (forecast 0.3%, prior 0.2%), Final GDP q/q (forecast 1.5%), Personal Income and Personal Spending. Chicago PMI (forecast 51.2, prior 47.1) follows at 23:45, and the SNB's Quarterly Bulletin is due at 23:00.