FX Daily · Tuesday, 13 October 2026
Dollar: oil eases, the real yield holds
By Walid Qairmi, Macro Edge, written by AI · data as of 16:53 CEST
The dollar is pausing below its 18-month high: our index is down 0.12% at 102.27 and USD/JPY is down 0.30% at 158.12. Brent is off about 1.5% towards $105, and the US 10-year has followed it back to near 5.20%. The pullback is marginal: since August, the rise in long-end yields has come from the real yield (2.44% then 2.91% on a monthly average basis), while the breakeven has been stable around 2.33%. The dollar rests on a hawkish Fed, with the market pricing a December hike at 75-85%. September CPI, tomorrow at 14:30 and the last before the 28 October FOMC, will test that support. Our bias remains bullish on the USD, especially against a euro weighed down by the French risk premium. Core CPI at 0.1% or less would call that pricing into question, with wages at the lowest in the series.
What moved the market
Oil loosens its grip, the dollar gives up almost nothing
The facts
Brent futures are down about 1.5% towards $105 this Tuesday, according to CNBC and Reuters. Washington temporarily lifted sanctions on Russian fuel on Friday, with 300,000 tonnes of diesel available immediately and 500,000 tonnes in November, and Donald Trump announced an “energy ceasefire” between Russia and Ukraine on Sunday, which Moscow has not confirmed; Kyiv reports at least six energy facilities struck since. Houthi attacks on Saudi Arabia and a new attack on a tanker in the Strait of Hormuz are limiting the decline. The EIA Brent spot price in our dataset, at $120.03, dates from 2 October and is not comparable with today's futures price.
The market
After the bond market closed on Monday for Columbus Day, the US 10-year is down 4 bp at 5.202% intraday and the 30-year down 4 bp at 5.552%. The ICE dollar index has come back from 102.57 in Tokyo to 102.25 at the London open, ending a run of four gains; our index is down 0.12% at 102.27, below its 7 October high of 102.41. Investors did not seek refuge in the dollar despite the 6.5% fall in the Kospi, dragged down by semiconductors.
Our reading
Our reading is that traders are waiting for CPI before repositioning: a 4 bp pullback in the 10-year does not dent a rise of nearly 50 bp in the real yield since August. Oil acts mainly on the breakeven, which has stayed between 2.31% and 2.36% over three months, and the dollar rests on the real premium. Lower energy prices would only weigh on the USD if they changed Fed pricing, which a single 1.5% down session does not do.
% (l.), % (r.)
Sources : Federal Reserve (T10YIE, DFII10), Macro Edge Terminal (5Y5Y panel) 01/10/2026.
% (l.), % (r.)
Sources : US Treasury (DGS2, DGS10), Macro Edge Terminal (CURV panel) 09/10/2026.
10-year breakeven and 10-year real yield (TIPS). The 10-year real yield has gained nearly 50 bp since August, the breakeven 2 bp. The fall in oil bears on the component of long-end yields that has moved least.
US 2-year and US 10-year. The 2-10-year curve reached +44 bp on 9 October: the long end has carried most of the rise since September. Its 4 bp pullback this Tuesday remains within the range of the past two weeks.
The Fed promises to hike, the ECB and the BoJ hold back
The facts
After the 25 bp hike on 16 September, voted 12-0, the dot plot puts the end-2026 median at 4.1%, implying one more hike. Christopher Waller argued on 8 October for further hikes “in the coming months”, not necessarily consecutive, with core PCE close to 3%. Beth Hammack prefers “prompt and small” adjustments and believes more than one will be needed. By contrast, the BoJ is said to lean against a second consecutive hike on 30 October, according to Bloomberg, and 70 of 73 economists polled by Reuters expect the ECB to hold on 29 October.
The market
CME FedWatch, cited by FXStreet, gives an 80.6% probability of a hold on 28 October and an 84.7% probability of a cumulative hike by December; other measures put December between 72% and 75.5%. The US 2-year stood at 4.80% on 9 October, against a peak of 4.92% on 28 September; today's level is not verified. On the ECB side, an October hike is priced at around 12-13%, and USD/JPY moved between 157.83 and 158.2 around the BoJ report.
Our reading
The dollar benefits from a credibility differential: of the three central banks, only the Fed is committing to further hikes, with the ECB held back by France and the BoJ by caution. Long-end yield spreads point the same way, at 182 bp over the Bund and 224 bp over the JGB on a September average, after 156 bp and 181 bp in August. This support holds as long as December stays priced; tomorrow's CPI will be its first test.
% year on year (l.), % (r.)
Sources : BEA (PCEPILFE), US Treasury (DGS2), Macro Edge Terminal (IMPLIED panel) 01/08/2026.
% (l.), % (r.)
Sources : US Treasury (DGS10), OECD (IRLTLT01DEM156N), Macro Edge Terminal (SPRDS panel) 01/10/2026.
Core PCE and US 2-year. Core PCE, the Fed's de facto target, has held around 3% since the spring. The 2-year has moved from 4.34% at the end of August to 4.80%, which suggests the front end has absorbed the governors' message.
US 10-year and 10-year Bund. On a monthly average basis, the 10-year Treasury-Bund spread widens from 156 bp in August to 182 bp in September. This widening accompanies the 4.0% fall in EUR/USD since 9 September, without being its only explanation.
The euro pays for France, sterling banks on the BoE
The facts
The 10-year OAT-Bund spread is holding around 140 bp, after peaking at 152 bp, the widest since 2011, with the OAT close to 5%. The finance committee rejected the revenue section of the 2027 budget by 31 votes to 3, and the National Assembly votes on Article 1 tomorrow. Destatis confirmed this morning German September inflation at 3.3%, the highest since December 2023, with energy at +14.9% year on year. The BoE's Megan Greene believes rates should go above 3.75% and that waiting for second-round effects would be too late; a November hike is reportedly priced at around 84%, a figure not verified against a market source.
The market
EUR/GBP falls to 0.8446, the lowest in the series, against 0.8605 on 25 September. EUR/USD is up 0.06% at 1.1188 at the ECB fixing, after closing on Monday at 1.1156, a 17-month low according to Vibiznews; it has lost 4.0% since 9 September. GBP/USD is up 0.08% at 1.3247.
Our reading
German inflation at 3.3% should have supported the ECB hawks; it changed nothing in October pricing, which suggests French risk is outweighing the inflation signal, a reading ING shares. The gilt-Bund spread is stable, at 177 bp in September against 180 bp in August, so the fall in EUR/GBP is not explained by relative long-end yields. It seems to reflect two central banks, one of which can hike without any visible fiscal constraint and the other cannot.
pounds per euro (l.), dollars per euro (r.)
Sources : ECB, Macro Edge Terminal (FORCE panel) 13/10/2026.
% (l.), % (r.)
Sources : OECD (IRLTLT01DEM156N, IRLTLT01GBM156N), Macro Edge Terminal (SPRDS panel) 01/09/2026.
EUR/GBP and EUR/USD. EUR/GBP touches 0.8446, the lowest in the series, while EUR/USD slides: the euro is also falling against a European currency. The 0.39 correlation over 60 sessions is consistent with euro-specific weakness, without proving it.
10-year Bund and 10-year gilt. The 10-year gilt-Bund spread is almost stable, at 180 bp in August and 177 bp in September on a monthly average basis. The drop in EUR/GBP therefore does not come from relative long-end yields, which points to French risk and BoE pricing.
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Pricing gap
The two core inflation measures have swapped places: PCE is 56 bp above CPI, whereas the series showed the opposite at the start of the period (3.82% against 3.15%). Wages do not validate a spiral, which leaves December pricing dependent on oil and PCE. A soft core CPI will not on its own be enough to remove the hike, since the Fed thinks in PCE terms.
The narrative
The market is pricing a Fed that still has to hike, at 75-85% for December, on the view that inflation is spreading. Beth Hammack points to an “inflationary mindset” among her contacts and Christopher Waller to expensive oil through 2027.
The data
Core CPI stood at 2.45% in August, well below the 3.8% peak at the start of the series, and hourly earnings are slowing to 3.02%, the lowest in the series. Payrolls rose by +29,000 in September, with unemployment at 4.2%. Headline inflation at 3.35% owes 90 bp to energy. On the other hand, core PCE, the Fed's measure, stands at 3.01% and is not easing.
What closes it
Core CPI at 0.2% or less tomorrow, followed by a September PCE that breaks below 3%, would bring pricing closer to the wage data and weigh on the dollar. Conversely, core at 0.3% or more would close the gap on the Fed's side.
% year on year (l.), % year on year (r.)
Sources : BLS (CES0500000003, CPILFESL), Macro Edge Terminal (CLAIMS panel) 01/09/2026.
% year on year (l.), % year on year (r.)
Sources : BLS (CPIAUCSL, CPILFESL), Macro Edge Terminal (OFFI panel) 01/08/2026.
Average hourly earnings and Core CPI. Average hourly earnings slow to 3.02% year on year in September, the lowest in the series, and core CPI stood at 2.45% in August. Neither shows the second-round effects that would justify a Fed in catch-up mode.
Headline CPI and Core CPI. The gap between headline CPI (3.35%) and core (2.45%) reaches 90 bp in August: energy is driving headline inflation. The 4.17% peak in May shows how dependent this figure is on oil.
Currency by currency
The biases taking shape
USD · An energy pause on a base of real yields
Our dollar index is down 0.12% at 102.27 after a high of 102.41 on 7 October, which is +3.7% since 9 September. Today's pullback follows that of oil and the 10-year, which is back towards 5.20% after peaking at 5.31% on 5 October. It weighs little against the overall run: the 10-year real yield at 2.91% accounts for most of the rise in long-end yields, and the 2-year at 4.80% on 9 October has settled in line with a Fed promising further hikes.
Tomorrow's CPI is the last before the 28 October FOMC. The consensus expects +0.6% month on month for headline and +0.2% for core, against +0.4% and +0.3% in August; year on year, 3.6% or 3.7% depending on the source for headline, 2.5% for core. The market is pricing only around 20% for an October hike: core at 0.3% or more would push that probability up, while 0.1% would erode December.
ING puts long dollar positioning at 24% of open interest excluding the yen, which leaves the currency more vulnerable to a downside surprise than to an upside one. Our bias remains bullish, with medium confidence until CPI is released.
- Bias
- Haussier · confidence average
- Invalidation
- Core CPI at 0.1% m/m or less, followed by a December hike probability below 60% and a 10-year sustainably below 5.00%.
EUR · The French premium outweighs German inflation
EUR/USD is holding at 1.1188 at the ECB fixing, barely above its lowest close in the series at 1.1177 on 7 October, after closing on Monday at 1.1156 according to Vibiznews. The pair has lost 4.0% in a month. German inflation at 3.3% did not help: pricing for an ECB hike on 29 October remains around 12-13%, and the market seems to be waiting for December, like 90% of the economists polled by Reuters.
Tomorrow, the vote on Article 1 of the 2027 budget coincides with US CPI: two shocks that could work in the same direction. ING sees a test of the 1.110-1.112 area; an upside CPI surprise combined with a difficult vote would make that scenario plausible. EUR/GBP, at the lowest in the series, indicates that the weakness is not limited to the dollar.
- Bias
- Baissier · confidence average
- Invalidation
- A clear adoption of Article 1 bringing the OAT-Bund spread below 120 bp, and EUR/USD back above 1.1269, the 6 October close.
GBP · The BoE embraces a hike, sterling gains against the euro
Sterling is up 0.08% at 1.3247 against the dollar and EUR/GBP falls to 0.8446, its lowest in the series, which is -1.8% since 25 September. Megan Greene said this morning that rates should go above 3.75% and that the BoE should not count on bond markets to tighten in its place. A November hike is reportedly priced at around 84%, a figure from a secondary source.
UK data are less clear-cut than the rhetoric: CPI at 3.1% and core at 2.6% in August, below a Bank Rate of 3.75%, and unemployment at 4.9%. Sterling's support therefore rests on BoE rhetoric more than on the data, which makes the 20 October labour market release the first test. Against the dollar, sterling remains exposed to US CPI; our bullish bias is aimed mainly at EUR/GBP, with ING keeping a 0.84-0.85 range.
- Bias
- Haussier · confidence average
- Invalidation
- UK unemployment above 5.0% on 20 October, or EUR/GBP back above 0.8503, the 2 October close.
JPY · The BoJ steps back, oil offsets
USD/JPY is down 0.30% at 158.12 after closing at 158.60 on Monday. According to Bloomberg, the BoJ, at 1.25%, is said to lean against a hike on 30 October while keeping December open; market measures of an October hike diverge, between 12% and 26% depending on the source, but they have fallen since last week. The report triggered a move to 157.83 before a return towards 158.2.
The BoJ delay and a 224 bp spread between 10-year Treasuries and JGBs in September support the pair; the fall in oil, favourable for an energy importer, and in long-end US yields hold it back, so the two forces cancel out. Pressure from Scott Bessent for a stronger yen also limits appetite for the 159-160 area, the last closing peak being 159.60 on 2 September.
- Bias
- Neutral · confidence faible
- Invalidation
- A close above 158.60 after a strong CPI would tip the bias towards a bearish yen; a close below 156.88, the 28 September level, towards a bullish yen.
The scenarios
US September CPI, Wednesday 14 October at 14:30 (Paris time)
| If | Then |
|---|---|
| Stronger than expected: core at 0.3% m/m or more | US short-end yields ↑, October pricing (≈ 20%) revised up → USD likely supported, back towards our index's 102.41 high → Sensitive pairs: EUR/USD towards 1.1156 then 1.110-1.112; USD/JPY above 158.60, with a risk of Japanese verbal intervention |
| In line: headline +0.6%, core +0.2% | Headline inflation attributed to energy, December stays priced → USD stable, the market turns back to oil and the French budget vote → Sensitive pairs: EUR/USD and EUR/GBP via French risk |
| Weaker than expected: core at 0.1% or less | US 2-year ↓, December hike probability falls → USD likely under pressure, amplified by long positioning → Sensitive pairs: USD/JPY first; EUR/USD rebound capped by the OAT-Bund spread |
Paris time
Today's agenda
| Time | Event | Consensus | Précédent | FX sensitivity |
|---|---|---|---|---|
| 14:30 | Wed. 14/10, United States: September CPI, headline m/m | +0.6% | +0.4% | |
| 14:30 | Wed. 14/10, United States: September CPI, headline y/y | 3.6% (3.7% according to other sources) | 3.4% | |
| 14:30 | Wed. 14/10, United States: September CPI, core m/m | +0.2% | +0.3% | |
| 14:30 | Wed. 14/10, United States: September CPI, core y/y | 2.5% | 2.4% | |
| 20:00 | Wed. 14/10, Fed: Beige Book | n/a | n/a |
Invalidation
What would change ourmind
Our positive view on the USD, especially against the euro, would be called into question by:
- Core CPI at 0.1% m/m or less tomorrow, pushing the probability of a December hike below 60%.
- A US 10-year sustainably below 5.00% driven by the real yield, and not just by the breakeven.
- Adoption of Article 1 of the French budget bringing the OAT-Bund spread below 120 bp, with EUR/USD above 1.1269.
- Verbal or actual intervention by Japan, or USD/JPY below 156.88.
In short
What you need pick
The regime remains one of a dollar supported by the real yield and by a Fed alone in promising further hikes, against an ECB constrained by France and a BoJ holding back. The fall in oil offers a pause without changing this balance, because it acts on the breakeven more than on the real premium. The main risk is a soft core CPI that would set December pricing against wages at the lowest in the series, in a market already long dollar. Next catalyst: tomorrow's CPI at 14:30, the same day as the vote on Article 1 of the French budget.
Taken at 17:09, Paris time
The markets in numbers
| Price | 1 session | 1 month | Since 31/12 | |
|---|---|---|---|---|
| Currencies | ||||
| EUR/USD | 1.1188 | +0.06% | −3.49% | −4.78% |
| USD/JPY | 158.12 | −0.30% | +2.65% | +0.93% |
| GBP/USD | 1.3247 | +0.08% | −1.94% | −1.63% |
| USD/CHF | 0.8323 | −0.06% | +2.09% | +5.00% |
| USD/CAD | 1.4241 | −0.14% | +2.77% | +4.01% |
| AUD/USD | 0.6978 | +0.06% | −2.71% | +4.41% |
| NZD/USD | 0.5613 | +0.25% | −3.57% | −2.64% |
| EUR/GBP | 0.8446 | −0.02% | −1.58% | −3.21% |
| Dollar index (Macro Edge calculation) | 102.27 | −0.12% | +3.13% | +4.10% |
| Rate | ||||
| US 2-year | 4.80 % | +5 bp | +37 bp | +133 bp |
| US 10-year | 5.24 % | +2 bp | +41 bp | +106 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 statement, 16/09/2026.
- 2. Federal Reserve, Waller, Speech on the economic outlook, 08/10/2026.
- 3. Federal Reserve, October 2026 calendar, 13/10/2026.
- 4. ECB, Monetary policy decisions, 10/09/2026.
- 5. Destatis, Inflation rate at +3.3% in September 2026, 13/10/2026.
- 6. Statistics Canada, Labour Force Survey, September 2026, 09/10/2026.
- 7. RBA, Minutes of the September meeting, 13/10/2026.
- 8. ONS, UK Labour Market: October 2026 (release calendar), 20/10/2026.
- 9. CNBC, U.S. Treasury yields fall as energy prices pull back, 13/10/2026.
- 10. CNBC / Reuters, Oil: Russian diesel, Houthis and Hormuz, 13/10/2026.
- 11. Bloomberg, BOJ Is Said to Lean Against Back-to-Back Rate Hike in October, 13/10/2026.
- 12. Bloomberg, BOE's Greene Says UK Growth Upgrade Is Proof Rate Hike Needed, 13/10/2026.
- 13. Reuters via Investing.com, Fed's Hammack hopes to cool demand and inflation without job market pain, 13/10/2026.
- 14. Reuters / RTE, Poll of economists on the ECB, 08/10/2026.
- 15. Al Jazeera, Trump insists energy ceasefire holds as Ukraine reports new Russian strikes, 13/10/2026.
- 16. FXStreet, Forex Today: US Dollar retreats from 18-month high as bond yields, oil prices ease, 13/10/2026.
- 17. FXStreet / TradeTheNews, French risk spreads from OATs into the Euro as Assembly takes up the budget, 13/10/2026.
- 18. FinancialJuice, US CPI Prep (14th October), 12/10/2026.
- 19. Tickmill, Daily Market Outlook, 13/10/2026.
- 20. InstaForex, Dollar Falls on Tuesday, 13/10/2026.
- 21. ING THINK (counterpoint), FX Daily: No trigger in sight for a dollar reversal, 13/10/2026.
- 22. ING THINK (counterpoint), FX Daily: High bar for a dollar correction, 09/10/2026.
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.
