FX Daily · Thursday, 8 October 2026
Oil lifts the dollar; the Fed must follow
By Walid Qairmi, Macro Edge, written by AI · data as of 08:45 CEST
The dollar regains the upper hand against the currencies of energy importers: EUR/USD reaches 1.1206, its lowest close in the past 30 sessions, while the DXY holds at 102.29. The overnight trigger is Brent, up 2.90% to $103.11 after new attacks on tankers in the Gulf. Underpinning the move is a US 10-year yield of 5.28%, 61bp above its level on 26 August. The market prices a Fed rate rise by December to contain energy inflation, even as core inflation and employment slow. The CPI release on 14 October will have to resolve that gap. Today, the ECB meeting account at 13:30 and the US 30-year auction at 19:00 dominate the calendar. Our bias remains favourable to the dollar against the euro and Canadian dollar, and neutral against a yen whose weakness remains limited by the threat of intervention.
What moved the market
Hormuz tightens; energy importers pay the price
The facts
Brent rose 2.90% overnight to $103.11 and WTI 2.66% to $90.63, after Brent closed at $100.20 on Wednesday. According to The National, commodity shipping through the Strait of Hormuz has fallen to its lowest level since 23 July, with 7 and then 10 daily crossings against more than 20 earlier in the week. A tanker was struck north of Qatar on 8 October. The newspaper reports at least 12 attacks on tankers between 28 September and 5 October, a weekly record since the war with Iran began in late February. The time of the attack and its direct link to the rise in oil have not been established.
The market
Energy-importing and cyclical currencies fell together: sterling lost 0.49%, the euro 0.42%, the New Zealand dollar 0.41% and the Australian dollar 0.36%. The Canadian dollar also fell 0.31% despite oil, while USD/JPY held at 158.19. The Brent–WTI spread reached $12.5, against $5.9 on 28 August. Gold, at $4,139, gained no benefit from the tension and silver fell 1.28%.
Our reading
Our reading is that the market treats this renewed tension as a terms-of-trade shock for energy importers. Signs of risk aversion are missing: the VIX closed at 15.08 on Wednesday, gold is not rising and USD/CHF is up 0.07%. The widening Brent–WTI spread suggests a premium concentrated in seaborne crude, weighing first on Europe and Asia. This is consistent with the ranking of overnight currency falls. The Canadian dollar's decline also shows that oil no longer drives every energy-linked currency.
The US yield curve does the Fed's work
The facts
The minutes of the 15 and 16 September FOMC meeting, released yesterday at 20:00, show that most participants think another increase “would likely be appropriate by the end of the year”, after the unanimously approved 25bp rise that took the range to 3.75–4.00%. The text notes that the longer energy stays expensive, the greater the risk of cost increases spreading to other prices. These discussions preceded the employment report on 2 October. The 10-year yield closed at 5.28% on Wednesday (+0.8bp), while the $39bn 10-year auction cleared at 5.300%, with a 1.7bp stop-through and a bid-to-cover ratio of 2.77, according to Helious (figures not cross-checked with TreasuryDirect).
The market
The DXY is at 102.29, its highest close in the past 30 sessions, against 98.77 on 9 September. Gold has lost 11% since 27 August and reached its lowest close over the period, despite war and oil. At the front end, the probability of an increase as early as 28 October has fallen to between 15 and 22%, according to estimates reported in the press, against around 36% a week earlier. The December increase remained above 75% in early October according to FedWatch cited by CNBC. These probabilities have not been verified on the CME website.
Our reading
The dollar kept rising while the chances of an October increase halved after the employment report, suggesting it relies more on the level of long-term yields than on the Fed's precise timetable. A 10-year yield of 5.28% already tightens financial conditions, and falling gold is consistent with this real-rate interpretation. The 10-year auction shows buyers appearing around 5.30%; tonight's 30-year auction will indicate whether that demand extends to the far end of the curve.
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Pricing gap
The Fed is preparing to fight energy-driven inflation with rates, while wage growth of 3.0% shows no transmission to incomes. With a December probability above 75%, the market leaves little room for a pause scenario. That is where the dollar is most exposed. The euro at 1.1206 already reflects a long list of bad news; the dollar chiefly reflects confirmation from the Fed.
The narrative
The market appears to believe that a Fed facing headline inflation of 3.35% and oil above $100 will raise rates again by December. The minutes support that view, and a 10-year yield of 5.28% extends the logic across the curve. The dollar gains a yield advantage against every major currency except the yen.
The data
US data points to a supply shock imported through energy. CPI excluding food and energy fell to 2.45% in August, its lowest level in the 30 months covered by our series, against 2.82% in May. The economy created 29,000 jobs in September after downward revisions of 60,000 for July and August, averaging 45,000 a month over a year, while hourly earnings grew 3.0% year on year. Only PCE excluding food and energy, at 3.01% in August, remains close to its highs.
What closes it
September CPI, on 14 October at 14:30, is the main test: a weak monthly core reading would undermine the December increase; an accelerating core reading would validate the minutes. Thursday's jobless claims and comments from Fed members before the 27 and 28 October meeting will provide interim clues. Brent falling below $100 would also weaken the minutes' energy argument.
% year on year (l.), % year on year (r.)
Sources : BLS via FRED (CPIAUCSL, CPILFESL), Macro Edge Terminal (OFFI panel) 01/08/2026.
% of the labour force (l.), thousands of jobs per month (r.)
Sources : BLS via FRED (UNRATE, PAYEMS), Macro Edge Terminal (CLAIMS panel) 01/09/2026.
Headline CPI and Core CPI. Headline inflation (3.35%) and inflation excluding food and energy (2.45%) have diverged since spring: the former follows oil, while the latter has fallen from 2.82% in May. This is the data the market must reconcile with a Fed rate rise in December.
Unemployment rate and Job creation (NFP). Job creation fell to 29,000 in September, following downward revisions of 60,000 for July and August, and unemployment rose to 4.2%. A Fed considering another rate rise would be doing so against a labour market creating an average of 45,000 jobs a month over a year.
Currency by currency
The biases taking shape
EUR · The euro pays the energy bill and the French risk premium
EUR/USD reaches 1.1206, its lowest close in the past 30 sessions, after losing 3.7% since 10 September. The overnight move erases Wednesday's rebound to 1.1254. The weakness is euro-specific: EUR/GBP has fallen from 0.8610 on 25 September to 0.8485, three pips above its low for the period. September's flash HICP reached 3.8%, with energy up 18.8% year on year and core inflation at 2.5%. France's premium adds to this: the OAT–Bund spread widened by 7bp to 134.4bp on 7 October according to Ideal-Investisseur. Other sources cite higher levels that we could not verify, ahead of Moody's review on 23 October.
The ECB's two increases, which took the deposit rate to 2.50%, are not supporting the euro. This suggests the market reads them as an additional drag on growth in the face of a supply shock. Pricing for an increase on 29 October ranges from 18 to 29% depending on the source, with no reliable OIS data. Philip Lane at 12:00 and the account of September's meeting at 13:30 will show how many members wanted to go further. The Eurogroup meeting in Luxembourg may also produce comments on France.
pounds per euro (l.), dollars per euro (r.)
Sources : Yahoo Finance (EURGBP=X, EURUSD=X), Macro Edge Terminal (FORCE panel) 08/10/2026.
EUR/GBP fell from 0.8610 on 25 September to 0.8485 while EUR/USD slipped towards 1.1206. Both pairs falling together points to euro-specific weakness that dollar strength alone cannot explain.
- Bias
- Baissier · confidence average
- Invalidation
- A close above 1.1298, the average of the past 10 sessions, with EUR/GBP above 0.8539 or a narrowing of the OAT–Bund spread before Moody's review.
GBP · Sterling holds against the euro and gives way to the dollar
GBP/USD falls 0.49% to 1.3202, the largest overnight decline in our universe, returning to the bottom of its six-session range (1.3200–1.3267). Against the euro, sterling has gained 1.5% since 25 September thanks to BoE support: a hold at 3.75% on 17 September with three votes for an increase, Governor Bailey judging tightening likely, and around an 80% chance of an increase on 5 November according to secondary sources. That support has limits. The 10-year gilt ended Wednesday at 5.45% and the 30-year at 6.00%, a first since 1998 according to Investing.com, three weeks ahead of the 28 October budget. A rise in long-term yields driven by the fiscal premium helps the currency less than one driven by the central bank.
- Bias
- Neutral · confidence faible
- Invalidation
- A close below 1.3200, the lowest close in the past 30 sessions, with the 30-year gilt above 6%, would signal that the fiscal premium outweighs BoE support.
JPY · Tokyo's ceiling matters more than US yields
USD/JPY holds at 158.19 (-0.07%) while Brent gains 2.9% and Japan imports its energy. Since 24 September, the pair has closed between 157.36 and 158.81 as the US 10-year yield rose 11.5bp. Over 30 sessions, the yen is the only major currency in our universe to gain against the dollar. Its daily correlation with the 10-year yield is even negative, at -0.11 over 60 sessions.
This behaviour is consistent with intervention risk: Tokyo spent a record ¥11,730bn in April–May, and coordinated intervention with Washington was confirmed on 3 August according to secondary sources. The BoJ, at 1.25%, is assigned around a 90% probability of an increase by December and 12% in October (secondary sources). Our reading is that the market treats the 160 area as a ceiling, making the risk asymmetric in the yen's favour if a shock occurs.
yen per dollar (l.), % (r.)
Sources : Yahoo Finance (JPY=X, ^TNX), Macro Edge Terminal (CURV panel) 08/10/2026.
The US 10-year yield has risen 61bp since late August, while USD/JPY has moved from 159.32 to 158.19 over the same period. This decoupling is consistent with a ceiling linked to the threat of intervention around 160, without proving it.
- Bias
- Neutral · confidence average
- Invalidation
- A close above 158.81 followed by a move towards 160.20 without a verbal response from Tokyo would indicate that the ceiling is weakening.
CAD · The rate differential eclipses oil
USD/CAD rises 0.31% to 1.4256, 8 pips below its highest close of the past 30 sessions (1.4264 on 6 October). Since 28 August, Brent has gained 15.5% and USD/CAD 2.9%: the Canadian dollar falls with more expensive oil. The daily correlation with Brent remains negative (-0.22 over 60 sessions), so the daily relationship persists, but over a month the rate differential appears to dominate.
The BoC has held at 2.25% since October 2025 against a Fed at 3.75–4.00% considering an increase: a gap of 150 to 175bp. Canadian employment fell by 41,700 in August. Friday's September survey at 14:30 is expected to show unemployment at 6.5%, according to a secondary source. Our reading is that CAD remains exposed to any confirmation of the December increase, ahead of the BoC decision on 28 October.
- Bias
- Baissier · confidence average
- Invalidation
- Positive job creation on Friday with unemployment below 6.5%, followed by USD/CAD moving back below 1.4212, the close on 7 October.
The scenarios
Auction of $22bn in 30-year Treasury bonds (reopening), 19:00 Paris time; previous yield 5.308% on 10 September (size and previous yield from secondary sources)
| If | Then |
|---|---|
| Strong demand, yield below the when-issued level | US long-term yields ↓ → Less support for the dollar, relief for gold → Sensitive pairs: USD/JPY, EUR/USD, AUD/USD |
| In line | US curve little changed → Oil remains the session's main driver → Pro-dollar bias intact against EUR and CAD |
| Weak demand, yield above the when-issued level | US long-term yields ↑ → USD likely supported against EUR, GBP and CAD → USD/JPY meets resistance in the 158.81–160.20 area, where intervention risk increases → Equities and gold under pressure |
Paris time
Today's agenda
| Time | Event | Consensus | Précédent | FX sensitivity |
|---|---|---|---|---|
| 12:00 | ECB: Philip Lane, SG Global Markets conference (London) | n/a | n/a | |
| 13:30 | ECB: account of the 9 and 10 September meeting | n/a | n/a | |
| 14:30 | United States: weekly jobless claims (week ending 3 October) | 200,000 (unverified) | 197 000 | |
| 19:00 | US Treasury: 30-year auction (reopening, $22bn) | n/a | 5.308% (unverified) |
Invalidation
What would change ourmind
Our favourable bias towards the dollar against the euro and Canadian dollar would be challenged by:
- Brent closing back below $100 ($100.20 on Wednesday), accompanied by EUR/USD moving back above 1.1255.
- September CPI, on 14 October, showing a weak monthly core reading that takes the probability of a December Fed increase back below 50%.
- The US 10-year yield returning below 5.16%, its close on 24 September, following a well-absorbed 30-year auction.
- An ECB meeting account or Lane speech opening the door to an increase on 29 October, with EUR/GBP above 0.8539.
In short
What you need pick
The regime remains one of a dollar supported by US long-term yields at 5.28% and an oil shock that impoverishes energy importers, led by the euro. The dominant trade-off pits dollar yield against energy-importing currencies and currencies whose central banks are standing still, such as the Canadian dollar. The yen is the exception, protected by the threat of intervention. The main risk lies in US data, which could deprive the Fed of its December increase as core inflation and employment are already slowing. The next test is the 30-year auction at 19:00, before Canadian employment on Friday and US CPI on 14 October.
Taken at 08:59, Paris time
The markets in numbers
| Price | 1 session | 1 month | Since 31/12 | |
|---|---|---|---|---|
| Currencies | ||||
| EUR/USD | 1.1197 | −0.50% | −3.70% | −4.68% |
| USD/JPY | 158.20 | −0.06% | +2.83% | +1.15% |
| GBP/USD | 1.3198 | −0.52% | −2.57% | −2.00% |
| USD/CHF | 0.8328 | +0.07% | +2.94% | +5.19% |
| USD/CAD | 1.4261 | +0.34% | +3.31% | +4.14% |
| AUD/USD | 0.6954 | −0.40% | −3.69% | +3.82% |
| NZD/USD | 0.5596 | −0.49% | −4.87% | −3.37% |
| EUR/GBP | 0.8481 | −0.01% | −1.18% | −2.76% |
| DXY | 102.29 | +0.04% | +3.49% | +4.08% |
| Rate | ||||
| US 2-year | 4.77 % | −2 bp | +40 bp | +130 bp |
| US 10-year | 5.28 % | +1 bp | +49 bp | +111 bp |
| Commodities | ||||
| Brent | 103.33 | +3.12% | +5.52% | +69.81% |
| WTI | 90.79 | +2.84% | −2.41% | +58.12% |
| Natural gas (Henry Hub) | 3.26 | +1.69% | +11.69% | −11.64% |
| Copper | 6.675 | +1.19% | −0.95% | +18.56% |
| Silver | 59.46 | −0.73% | −10.31% | −15.22% |
| Gold | 4,149 | +0.20% | −6.53% | −4.42% |
| Equities and volatility | ||||
| S&P 500 | 7,802 | −0.22% | +1.08% | +13.97% |
| VIX | 15.08 | +0.47% | −1.44% | +0.87% |
Changes in % for prices, in basis points for rates. Each line carries the date of its latest official release: ECB reference rates (around 4 pm the day before), US Treasury, EIA (spot prices, a few days' lag), IMF for metals (monthly averages). The dollar index is calculated by Macro Edge from ECB rates, using the historical index weights. Official sources, via the Macro Edge Terminal.
Sources
- 1. Federal Reserve, Minutes of the Federal Open Market Committee, September 15-16, 2026, 07/10/2026.
- 2. Federal Reserve, FOMC statement, 16/09/2026.
- 3. Bureau of Labor Statistics, The Employment Situation, September 2026, 02/10/2026.
- 4. Eurostat, Euro area annual inflation up to 3.8% (flash estimate, September 2026), 02/10/2026.
- 5. European Central Bank, Monetary policy decisions, 10/09/2026.
- 6. European Central Bank, Weekly schedule of public speaking engagements and other activities, octobre 2026.
- 7. The National, Hormuz traffic hits lowest level in two months as tanker attacks surge, 08/10/2026.
- 8. Helious, 10-Year Treasury Note Auction Results, 07/10/2026.
- 9. Mitrade, Euro slides to a 17-month low as France's budget crisis spreads, 08/10/2026.
- 10. CNBC (citing CME FedWatch), Probabilities of a Fed rate rise in December, 02/10/2026.
- 11. Ideal-Investisseur, Spread OAT-Bund, 07/10/2026.
- 12. Trading Economics, UK 10Y and 30Y gilt yields, 07/10/2026.
- 13. Investing.com, GBP/USD range masks a deeper clash between rate hikes and gilt stress, octobre 2026.
- 14. Saxo, Bank of England holds, 17/09/2026.
- 15. Tradingpedia, Yen weakens as markets scale back BoJ rate hike bets, 07/10/2026.
- 16. Political.org, US and Japan conduct coordinated yen intervention, signal readiness for more, 02/08/2026.
- 17. TIOmarkets, Canada unemployment rate preview, 9 October 2026, octobre 2026.
- 18. FinanceCalendar, Bank of Canada rate decisions, octobre 2026.
- 19. The Rio Times, Global economy briefing, October 8, 2026, 08/10/2026.
This publication is provided for information purposes only and is neither investment advice nor a recommendation to buy or sell any financial instrument. Written with the help of artificial intelligence (Claude, Anthropic) and published under the editorial responsibility of Walid Qairmi, publication director of Macro Edge. Figures are facts, sourced and dated; biases and scenarios are the author's opinions as of the publication date and may change without notice. The author is a student and keeps learning every day. Conflicts of interest: the author may personally take positions on some of the ideas presented; Macro Edge receives no compensation from any broker, issuer or third party for this publication.
