USD Leads FX Markets After a Week of Policy Divergence
💵 The US dollar ended the week of September 14–19 as one of the strongest G10 currencies, with the DXY breaking above 100 and reaching its highest level in around seven weeks. The move was mainly driven by the Fed’s return to rate hikes, relatively resilient US economic data, and elevated Treasury yields.
🏦 The Fed raised rates by 25 basis points to 3.75–4.00% and kept the door open to further tightening if inflation does not cool sufficiently. Meanwhile, the BoE held rates at 3.75% while warning about energy-driven inflation risks, and the BoJ lifted rates to 1.25%, although its cautious guidance left the yen under pressure.
📉 This policy divergence was clearly reflected across major FX pairs. EUR/USD fell toward 1.145, GBP/USD traded around 1.33, while USD/JPY briefly moved above 158 despite Japan’s latest rate increase. The yield gap with the US remains a significant headwind for the euro, pound and especially the yen.
🛢 Oil prices remaining above $100 per barrel continue to add to global inflation pressure. For the US, high energy prices combined with resilient economic data are reinforcing expectations that rates may stay elevated for longer, while energy-importing economies such as the Eurozone and Japan face greater pressure.
📊 During September 21–25, attention will shift toward preliminary September PMI data and fresh signals from trade and policy developments. If US data remain firm and yields stay elevated, the dollar could continue to find support. Conversely, weaker PMI readings or a meaningful decline in oil prices could trigger a technical correction after the dollar’s strong weekly advance.
#ForexInsights $USDC
💵 The US dollar ended the week of September 14–19 as one of the strongest G10 currencies, with the DXY breaking above 100 and reaching its highest level in around seven weeks. The move was mainly driven by the Fed’s return to rate hikes, relatively resilient US economic data, and elevated Treasury yields.
🏦 The Fed raised rates by 25 basis points to 3.75–4.00% and kept the door open to further tightening if inflation does not cool sufficiently. Meanwhile, the BoE held rates at 3.75% while warning about energy-driven inflation risks, and the BoJ lifted rates to 1.25%, although its cautious guidance left the yen under pressure.
📉 This policy divergence was clearly reflected across major FX pairs. EUR/USD fell toward 1.145, GBP/USD traded around 1.33, while USD/JPY briefly moved above 158 despite Japan’s latest rate increase. The yield gap with the US remains a significant headwind for the euro, pound and especially the yen.
🛢 Oil prices remaining above $100 per barrel continue to add to global inflation pressure. For the US, high energy prices combined with resilient economic data are reinforcing expectations that rates may stay elevated for longer, while energy-importing economies such as the Eurozone and Japan face greater pressure.
📊 During September 21–25, attention will shift toward preliminary September PMI data and fresh signals from trade and policy developments. If US data remain firm and yields stay elevated, the dollar could continue to find support. Conversely, weaker PMI readings or a meaningful decline in oil prices could trigger a technical correction after the dollar’s strong weekly advance.
#ForexInsights $USDC
