FX Daily · Friday, 9 October 2026
Dollar: long-term yields retreat; the greenback holds
By Walid Qairmi, Macro Edge, written by AI · data as of 08:15 CEST
The US 10-year yield fell 6bp on Thursday to 5.22%, but our dollar index gave up only 0.05%, to 102.36, still 3.2% above its level on 28 August. The easing came at the long end, with a well-absorbed 30-year auction and Donald Trump's pledge not to strike Iran before 3 November, while the 2-year yield fell only 2bp. The FOMC minutes judge another increase “likely” by the end of 2026, while jobless claims at 197k provide no reason to revise that path. Today, Canadian employment at 14:30 and Michigan at 16:00 offer little material for the dollar. Our bias remains positive, while the euro carries its own French risk premium.
What moved the market
The long end eases; the dollar does not follow
The facts
The US 10-year yield closed at 5.22% on Thursday, down 6bp, while the 30-year fell around 5bp after reaching a 24-year high. The $22bn 30-year auction was judged strong, following another well-received 10-year auction the day before. The 2-year yield fell only 2bp, to 4.75%, and weekly jobless claims came in at 197k, their fourth week below 200k. Christopher Waller spoke on the outlook; the details of his comments could not be verified at publication.
The market
Our dollar index ended at 102.36 (-0.05%), EUR/USD at 1.1186 (+0.08%) and USD/JPY at 158.28 (+0.03%). Currencies therefore barely registered a 6bp move in long-term yields. In Asia this morning, the dollar gives up a little ground against the euro and yen according to intraday quotes, without changing the overall picture.
Our reading
Our reading is that the market distinguishes two things. The long end carries a term premium that fluctuates with auctions and geopolitics; its decline says nothing about the Fed's path. The front end remains anchored by minutes judging another increase likely before year-end and a labour market that is not shedding workers. As long as the 2-year yield stays above 4.70%, easing in the 10-year should give the dollar pauses, rather than a reversal.
points (l.), % (r.)
Sources : ECB (Macro Edge calculation), US Treasury (DGS10), Macro Edge Terminal (CURV panel) 08/10/2026.
% (l.), % (r.)
Sources : Federal Reserve (T10YIE, DFII10), Macro Edge Terminal (5Y5Y panel) 01/10/2026.
DXY and US 10-year. The dollar index holds near 102.4 while the 10-year yield has fallen from 5.31% to 5.22% in three sessions. The dollar is not replicating the long end's easing.
10-year breakeven and 10-year real yield (TIPS). The 10-year breakeven remains at 2.35%, while the real yield has risen from 2.44% in August to 2.87% in October. The rise in long-term yields is a rise in real yields, making it a matter of term premium and the Fed rather than expected inflation.
Iran: strike risk falls; Hormuz risk rises
The facts
Donald Trump announced on Thursday that there would be no strikes on Iran before the 3 November midterm elections and spoke of “productive discussions”. The same day, Iran intensified attacks in the Strait of Hormuz and reduced flows, while the US Treasury sanctioned an oil fleet. WTI gained 3.6% on Thursday and Brent closed above $104; overnight, WTI fell towards $91. The Brent reading in the snapshot, $120.03, is an EIA spot value dated 2 October.
The market
Overnight, oil gave back part, but not all, of Thursday's gains. Gold is rising as yields fall. The yen remains stable around 158 to the dollar, while Asian equity markets are mixed, with the Nikkei down 0.8%.
Our reading
Trump's announcement removes a tail risk—near-term US military escalation—but not the physical supply constraint. The channel that matters for FX runs through inflation: August PCE at 3.42% and CPI at 3.35% keep the Fed poised to tighten, while the energy bill weighs on net importers, the euro area and Japan. WTI stabilising below $95 would ease pressure on the euro and yen; a further deterioration in Hormuz would do the opposite.
% year on year (l.), % year on year (r.)
Sources : BEA (PCEPI, PCEPILFE), Macro Edge Terminal (OFFI panel) 01/08/2026.
yen per dollar (l.), $ per barrel (r.)
Sources : ECB, EIA (spot Brent), Macro Edge Terminal (OILFX panel) 08/10/2026.
Headline PCE and Core PCE. Headline and core PCE stood at 3.42% and 3.01% in August, against 2.94% and 2.80% in January–February. The oil shock appears in the Fed's preferred index, explaining why the central bank remains in tightening mode.
USD/JPY and Brent. The Brent reading in the snapshot (EIA, $120.03 on 2 October) preceded USD/JPY's rise from 153 to 158 in September. The correlation of 0.26 remains weak; the chart illustrates the channel through Japan's energy bill without proving it.
The euro pays for France
The facts
The 10-year OAT–Bund spread stood at 134.4bp on 7 October, after exceeding 150bp on 2 October, its highest level since late 2011, according to secondary sources. On 1 October, the government presented a €43bn savings plan, information still requiring confirmation from the primary source. The ECB raised its deposit rate to 2.50% on 10 September, with inflation at 2.0% and core inflation at 2.3%.
The market
EUR/USD has fallen from 1.1643 on 28 August to 1.1186, and EUR/GBP from 0.8605 on 25 September to 0.8470, its low for the period. The euro is therefore weakening against both the dollar and sterling, supported by higher gilt yields and a tougher BoE tone: Andrew Bailey called for an “unwavering commitment” on inflation on Thursday.
Our reading
ECB tightening does not protect the euro while the French sovereign risk premium widens spreads. A rate rise that makes funding more expensive for a fragile issuer can be read as a risk factor rather than carry. Our reading is that EUR/USD will remain constrained until the OAT–Bund spread returns sustainably below 130bp, even if US yields keep falling.
pounds per euro (l.), dollars per euro (r.)
Sources : ECB, Macro Edge Terminal (FORCE panel) 08/10/2026.
% (l.), % (r.)
Sources : OECD (IRLTLT01DEM156N, IRLTLT01GBM156N), Macro Edge Terminal (SPRDS panel) 01/09/2026.
EUR/GBP and EUR/USD. EUR/GBP has fallen from 0.8605 on 25 September to 0.8470, while EUR/USD lost 1.9%. The euro is weakening against both the dollar and sterling: the problem is European.
10-year Bund and 10-year gilt. In September's monthly average, the 10-year gilt stands at 5.24% against 3.47% for the Bund, a spread that widened further over the summer. The correlation of 0.81 with EUR/GBP is a reminder that sterling benefits from carry the euro does not offer.
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Pricing gap
The Fed tightens in response to an oil supply shock while wages, the usual driver of persistent inflation, decelerate. This pricing therefore depends more on oil than on the domestic economy. The last verified FedWatch probability, 17% for an increase on 28 October as of 2 October, shows that the market has already postponed the timing. A December increase remained expected, without a more recent verified probability.
The narrative
The US front end prices a Fed that still needs to tighten: the 2-year yield is at 4.75%, up 41bp since late August, the minutes judge an increase “likely” by the end of 2026, and the dollar gains a floor.
The data
The labour market is slowing without breaking: 29k jobs created in September, unemployment at 4.2%, hourly earnings growing 3.02% year on year, the lowest level in the displayed series. Core CPI stands at 2.45%. The inflation accelerating is headline PCE (3.42%) and core PCE (3.01%), largely fuelled by energy.
What closes it
Lasting de-escalation in Hormuz taking oil back towards summer levels would remove the justification for the December increase and lower the 2-year yield. Conversely, faster wage growth or core CPI in October's releases would validate current pricing.
% year on year (l.), % year on year (r.)
Sources : BLS (CES0500000003, CPILFESL), Macro Edge Terminal (CLAIMS panel) 01/09/2026.
% year on year (l.), % (r.)
Sources : BEA (PCEPILFE), US Treasury (DGS2), Macro Edge Terminal (IMPLIED panel) 01/08/2026.
Average hourly earnings and Core CPI. Average hourly earnings slowed to 3.02% year on year in September, their lowest level in the displayed series, while core CPI stands at 2.45%. There is no sign of a US wage–price spiral.
Core PCE and US 2-year. The 2-year yield has risen from 4.34% to 4.75% since late August while core PCE has remained around 3%. The front end prices a Fed chasing energy inflation rather than wages.
Currency by currency
The biases taking shape
EUR · An ECB rate rise that does not protect the euro
EUR/USD ended Thursday at 1.1186, barely above the 1.1177 floor on 7 October, and EUR/GBP at 0.8470. The 6bp decline in the US 10-year yield delivered only 0.08% to the single currency, illustrating the weight of Europe's risk premium against the rate differential. The OAT–Bund spread, down from above 150bp to 134.4bp, remains at levels not seen since 2011.
With a 2.50% deposit rate and inflation at 2.0%, the ECB has already done what an energy-concerned market expected of it. Pricing for the next meeting could not be verified. With no major euro-area release today, the euro will depend on the dollar and the French bond market. Asian quotes point to a slight rebound this morning; 1.13, broken to the downside on 1 October, is the first test for any recovery.
- Bias
- Baissier · confidence average
- Invalidation
- A lasting return of the OAT–Bund spread below 130bp and an EUR/USD close above 1.13.
CAD · The loonie faces its labour market
USD/CAD closed at 1.4262, its highest level over the period, against 1.3854 on 28 August. The Canadian dollar has not benefited from the surge in oil: the correlation of daily changes with Brent over 60 sessions is effectively zero (0.02). The market appears to treat CAD more as a currency exposed to US growth and a fragile domestic labour market than as an oil currency.
September's employment survey, at 14:30, is expected at +9.5k with unemployment at 6.5%, after -41.7k and 6.4% in August. A second consecutive contraction would strengthen the view of a Bank of Canada constrained to caution while the Fed remains in tightening mode. BoC pricing could not be verified at publication.
- Bias
- Baissier · confidence average
- Invalidation
- Clearly positive job creation with stable or falling unemployment, and USD/CAD moving back below 1.42.
JPY · The yen between the oil bill and the threat of intervention
USD/JPY ended at 158.28, more than 5 yen higher than on 9 September (153.27). Japan, a net energy importer, suffers from the Hormuz shock, and a 10-year JGB averaging 3.05% in September does not offset the spread against a Treasury at 5.22%. August household spending fell 3.1% year on year, less than expected, but for a ninth consecutive month.
Japanese authorities intervened alongside the US Treasury in early August when the pair exceeded 160, and say they are ready to do so again. The risk is asymmetric: upside meets resistance at 160, while falling oil or US yields could quickly take the pair back towards 156.
- Bias
- Neutral · confidence faible
- Invalidation
- A break above 160 without a response from the Japanese authorities, reopening the path higher.
The scenarios
September Canadian employment survey (14:30)
| If | Then |
|---|---|
| Stronger than expected (clearly positive job creation, unemployment at 6.4% or below) | Canadian short-term yields ↑ → CAD likely supported → USD/CAD towards 1.42 → Sensitive pairs: USD/CAD, CAD/JPY |
| In line (around +10k, unemployment at 6.5%) | Limited reaction → USD/CAD driven by the broad dollar and oil → Holding around 1.4250 |
| Weaker than expected (second contraction, unemployment above 6.5%) | Canadian short-term yields ↓ → CAD under pressure → USD/CAD beyond 1.43 → Sensitive pairs: USD/CAD, EUR/CAD |
Paris time
Today's agenda
| Time | Event | Consensus | Précédent | FX sensitivity |
|---|---|---|---|---|
| 08:00 | Norway, September CPI (y/y), result unverified at the cut-off | 3,6 % | 3.3% (CPI-ATE 3.0%) | |
| 14:30 | Canada, September employment survey (jobs, unemployment rate) | +9.5k; 6.5% | -41.7k; 6.4% | |
| 16:00 | United States, University of Michigan, preliminary October sentiment and inflation expectations | 48,1 | 48,1 |
Invalidation
What would change ourmind
Our positive USD view would be challenged by:
- The US 2-year yield falling below 4.60%, signalling that the market removes the December increase rather than only the term premium.
- Verifiable de-escalation in Hormuz taking WTI sustainably below $85.
- The OAT–Bund spread returning below 130bp alongside an EUR/USD close above 1.13.
- A rise in Michigan inflation expectations that does not lift the front end, evidence of a dollar no longer responding to the Fed.
In short
What you need pick
The regime remains one of a dollar supported by a Fed tightening against an oil shock, with the front end anchored despite easing at the long end. The dominant trade-off pits near-term geopolitical relief against a worsening supply constraint in Hormuz. The main risk to our bias is falling oil that removes the justification for December's increase. Today, Canadian employment at 14:30 chiefly concerns USD/CAD; the next dollar test will come from October's US inflation data and the FOMC on 28 October.
Taken at 08:22, Paris time
The markets in numbers
| Price | 1 session | 1 month | Since 31/12 | |
|---|---|---|---|---|
| Currencies | ||||
| EUR/USD | 1.1186 | +0.08% | −3.69% | −4.80% |
| USD/JPY | 158.28 | +0.03% | +2.58% | +1.02% |
| GBP/USD | 1.3207 | +0.02% | −2.50% | −1.92% |
| USD/CHF | 0.8337 | +0.10% | +2.74% | +5.18% |
| USD/CAD | 1.4262 | +0.06% | +3.31% | +4.16% |
| AUD/USD | 0.6944 | −0.11% | −3.76% | +3.89% |
| NZD/USD | 0.5589 | −0.10% | −4.34% | −3.06% |
| EUR/GBP | 0.8470 | +0.06% | −1.22% | −2.94% |
| Dollar index (Macro Edge calculation) | 102.36 | −0.05% | +3.43% | +4.19% |
| Rate | ||||
| US 2-year | 4.75 % | −2 bp | +36 bp | +128 bp |
| US 10-year | 5.22 % | −6 bp | +42 bp | +104 bp |
| Commodities | ||||
| Brent | 120.03 | +2.52% | +33.77% | +89.89% |
| WTI | 98.07 | +4.81% | +15.89% | +69.06% |
| Gold (monthly average) | 4,335 | n/a | −1.92% | +0.48% |
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, FOMC, press conference and decision of 15–16 September 2026, 2026-09-16.
- 2. CNBC, Fed officials see another hike coming, but no sign as to when, minutes show, 2026-10-07.
- 3. CNBC, U.S. Treasury yields: investors await 30-year bond auction, 2026-10-08.
- 4. CNBC, Fed rate hike odds decline after September jobs report, 2026-10-02.
- 5. U.S. Department of Labor, Unemployment Insurance Weekly Claims, 2026-10-08.
- 6. Bloomberg, US jobless claims eased last week to lowest level since July, 2026-10-08.
- 7. CNN, Trump says no Iran attack before midterm elections, 2026-10-08.
- 8. Washington Post, Iran scales up Hormuz attacks, raising pressure on Trump as midterms near, 2026-10-08.
- 9. Bloomberg, Oil Declines After Trump Says No Iran Attacks Before Midterms, 2026-10-09.
- 10. AP (via WSLS), Asian shares are mixed and crude prices fall after an unsettled day on Wall St, 2026-10-09.
- 11. investingLive, BoE's Bailey: monetary policy needs an unwavering commitment to returning inflation to target, 2026-10-08.
- 12. CNBC, ECB interest rate hike, 2026-09-10.
- 13. Idéal Investisseur, Spread OAT-Bund, 2026-10-07.
- 14. CNBC, Yen intervention: US and Japan, 2026-08-03.
- 15. Admiral Markets, Canada unemployment rate September 2026: jobs report preview, 2026-10-08.
- 16. ING THINK, FX Daily: Hawkish Fed minutes keep dollar supported (alternative view), 2026-10-08.
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.
