EUR/USD stayed near a two-month low on Thursday, trading around 1.1372 and extending a fourth straight daily decline as rate expectations continued to underpin the US Dollar. The US Dollar Index (DXY) hovered near 101.27 after reaching 101.35, its highest level since 29 July. Markets have increasingly priced in another Federal Reserve move in October after last week’s 25-basis-point rise, and the CME FedWatch Tool put the probability at about 65%, up from 55% a week earlier. Separately, US Initial Jobless Claims ticked up to 197K from 196K, yet were below forecasts of 201K.
Higher inflation expectations linked to elevated oil prices, together with a hawkish repricing, pushed US Treasury yields to multi-year highs, with the 10-year around 5.10% after touching 5.15%, the highest since 2007. In Europe, stronger-than-expected German Ifo data lent some support to the euro, but broader dollar strength persisted even as markets anticipate further European Central Bank rate rises. Central banks’ inflation targets remain framed around 2%, while the Fed maintains eight policy meetings a year via the FOMC, which includes 12 officials; QE is described as bond buying that usually weakens the dollar, while QT is its reversal and is typically dollar-positive.
