FX Daily · Friday, 23 October 2026
The dollar decouples from its yields
By Walid Qairmi, Macro Edge, written by AI · data as of 08:11 CEST
The dollar came through the largest daily fall in US yields since March 2023 unscathed yesterday: the 2-year lost 16bp to 4.65%, and the Macro Edge dollar index gained 0.10% to 101.75. The driver was the Nasdaq, down 2.60% after Meta's results: in selling AI-related stocks, investors ranked currencies by safe-haven status, with the yen and the franc ahead of the dollar, and the euro, the AUD and the NZD behind it. The yen also has domestic support, with inflation excluding fresh food and energy at 2.4% in September, above the 2.3% consensus. Today's US flash PMIs (15:45) and Michigan survey (16:00) will show whether activity confirms the growth scare priced by the curve, ahead of Moody's review of France this evening. Our bias turns neutral on the dollar, stays bullish on the yen and turns bearish on the euro.
What moved the market
The Nasdaq drags yields lower, the dollar does not follow
The facts
Meta lost 7% after its results: the raising of its capex guidance and its plans to resell computing capacity were read as a sign of overinvestment in AI. The Philadelphia Semiconductor Index fell around 7%, Lam Research 11.8%, the Nasdaq Composite 2.60% (worst session since 5 June) and the S&P 500 1.21%, to 7,663, while the Dow finished flat. The US 2-year lost 16bp to 4.65%, and the 10-year 17bp to 4.96%, its lowest since 22 September; according to CNBC, the fall in the 10-year was the largest since 10 March 2023. US data do not explain this fall: jobless claims came in at 194k, below the 200k consensus.
The market
The Macro Edge dollar index gained 0.10% to 101.75. The dollar fell against the yen (USD/JPY −0.53% to 157.05) and the franc (USD/CHF −0.23% to 0.8220), and rose against the AUD (−0.31% to 0.7012), the euro (−0.26% to 1.1205), the NZD and sterling. The sell-off spread to Asia, with the Nikkei down 1.4% to 1.7% and the Kospi down 2.1% to 3.3%, depending on the source. In fed funds futures, traders held on to the hawkish Fed scenario: late in the session, investingLive reported a probability of only 22% of no hike by year-end.
Our reading
Our reading is that the fall in the 2-year reflects the Fed's path beyond December and demand for duration, with the December hike still priced. The short-rate differential has therefore ceased to be the dollar's marginal driver, and the dollar is behaving as a second-tier safe haven: it gains against equity-beta currencies and gives ground against the yen and the franc. This regime invalidates our bearish reading from yesterday, which was based on hawkish catch-up by the rest of the G10. An RBA hike on 3 November is now priced at 57-62%, more than two days ago, yet the AUD fell, a sign that risk appetite weighs more than rate differentials.
points (l.), % (r.)
Sources : ECB (Macro Edge calculation), US Treasury (DGS2), Macro Edge Terminal (2A-FF panel) 22/10/2026.
DXY and US 2-year. The 2-year lost 16bp in one session, returning to its 14 September level, and the dollar index rose 0.10%. Over 60 sessions, the correlation of daily changes is only 0.12.
The yen combines safe-haven demand and the BoJ
The facts
Japan's September CPI, released at 01:30, shows inflation excluding fresh food at 2.1% (consensus 2.1%, previous 1.7%), above 2% for the first time since December 2025, and excluding fresh food and energy at 2.4% (consensus 2.3%, previous 1.9%), while electricity subsidies remain in place. Economy Minister Kiuchi nevertheless considers that the conditions are not in place to declare an end to deflation. The 10-year JGB falls 9bp to 2.79% (single source), less than the Treasury. The BoJ, at 1.25%, is expected to hold on 30 October; for December, OIS pricing diverges across measures, from 39% to 60-80%, and 83% of economists surveyed by Bloomberg expect a hike.
The market
USD/JPY ended at the fixing at 157.05, its lowest since 30 September. The pair fell towards 156.3-156.5 overnight (exact low not verified) before returning to 157.03 at 07:20 Paris time. The franc followed the same path without a domestic catalyst, with USD/CHF closing at 0.8220, its lowest since 22 September.
Our reading
The yen benefits from two drivers that rarely coincide: safe-haven demand and a BoJ repricing that the CPI makes more credible. The return towards 157 suggests, however, that the oil channel, unfavourable for an energy importer, is still holding back the move. The pair has traded between 156.88 and 158.85 since 18 September; a close below the bottom of this range would signal that the yen has regained the upper hand over oil.
yen per dollar (l.), % (r.)
Sources : ECB, US Treasury (DGS10), Macro Edge Terminal (CURV panel) 22/10/2026.
% (l.), % (r.)
Sources : US Treasury (DGS10), OECD (IRLTLT01JPM156N), Macro Edge Terminal (SPRDS panel) 01/10/2026.
USD/JPY and US 10-year. Since 9 October, the US 10-year has lost 28bp, from 5.24% to 4.96%, and USD/JPY 0.8%, from 158.25 to 157.05. The yen is the major whose move yesterday tracked the fall in US yields most closely, with a 60-session correlation of 0.20, low but higher than that of the dollar index with the 10-year (0.14).
US 10-year and 10-year JGB. On a monthly average basis, the 10-year Treasury-JGB spread has moved from around 296bp in September 2024 to 224bp in September 2026, yet USD/JPY has stayed above 154 over the past 30 sessions. The JGB series in the dataset (3.05% in September) diverges from market quotes (2.79% this morning, single source): the level of the spread should be read with caution.
Oil up, gold down: a risk-off that keeps inflation in play
The facts
Brent futures gained around 4% to around $113, the highest close since May, and were trading around $113-114 this morning; the EIA spot Brent shown on the dashboard ($125.59) dates from 16 October. TTF rose 3% to above €90/MWh, its highest since December 2022. The Revolutionary Guards are threatening to strike US bases if escorts continue in Hormuz and claim strikes on four vessels, which Trump disputes; Saudi Arabia says it intercepted a ballistic missile and two drones over Riyadh. Gold lost nearly 2.9% to around $4,021 and briefly fell below $4,000, for the first time since July.
The market
US long-end yields fell despite oil, and the euro, whose area imports its gas and oil, gave up 0.26% against the dollar. The CAD gained only 0.08%, with support from crude barely offsetting the risk-off. Silver lost 5.9% and copper 2.7%.
Our reading
A fall in gold at the same time as yields suggests forced selling, including margin calls, rather than a simple flight to quality; this is a hypothesis. Rates accounts are pricing a growth risk and the energy market a supply risk; this combination hurts the euro first, as it is exposed both to gas and to the French premium. For the ECB and the BoE, the trade-off between imported inflation and weakening demand is tighter than for the Fed.
% (l.), % (r.)
Sources : Federal Reserve (T10YIE, DFII10), Macro Edge Terminal (5Y5Y panel) 01/10/2026.
dollars per euro (l.), $ per barrel (r.)
Sources : ECB, EIA (spot Brent), Macro Edge Terminal (OILFX panel) 22/10/2026.
10-year breakeven and 10-year real yield (TIPS). On a monthly average basis, the 10-year real yield moved from 2.44% in August to 2.93% in September and then 2.64% in October, while the breakeven stayed between 2.31% and 2.36%. US long-end yields are moving through their real component, and the rise in oil since August does not show up in market inflation expectations.
EUR/USD and Brent. Since 11 September, EIA spot Brent has moved from $111.83 to $125.59 (16 October value) and EUR/USD has lost 3.3%, from 1.1592 to 1.1205. The 60-session daily correlation is only −0.10: the trend is shared, but the day-to-day link remains weak.
The FX Daily signature
Pricing gap
The market holds two prices that are hard to reconcile: a Fed raising rates in December and a curve that returned to its mid-September levels in a single session on an equity shock. Our reading is that the fall concerns the path beyond December, without support in the published data. For FX, USD/JPY is the exposed pair, the only one to have followed yields: if the data hold up, a rebound in the front end would take away one of the yen's two supports.
The narrative
Rates accounts are treating the AI stock crash as a growth shock: the 10-year lost 17bp, its largest daily fall since March 2023, and the 2-year 16bp to 4.65%, back to its mid-September level. ING sees a regime change in which the long end fears growth more than inflation.
The data
No US data show this shock so far. Jobless claims came in at 194k, below the 200k consensus, unemployment is at 4.2%, headline CPI was 3.72% in September and core PCE 3.01% in August. Michigan one-year inflation expectations were 4.7% in the preliminary reading, and Brent futures ended around $113, the highest since May. Fed funds futures still price around a 78% chance of at least one hike by year-end.
What closes it
The S&P Global flash PMIs (15:45, services expected at 57.9) and the final Michigan survey (16:00) provide the first evidence today. The Fed statement on 28 October will settle the matter: a Fed confirming December would prove the curve wrong, a Fed citing tighter financial conditions would prove it right.
% year on year (l.), % year on year (r.)
Sources : BLS (CPIAUCSL, CPILFESL), Macro Edge Terminal (OFFI panel) 01/09/2026.
% year on year (l.), % year on year (r.)
Sources : BEA (PCEPI, PCEPILFE), Macro Edge Terminal (OFFI panel) 01/08/2026.
Headline CPI and Core CPI. Headline CPI rose from 2.39% in January to 3.72% in September, while core only moved from 2.51% to 2.57%. Rates accounts bought duration yesterday with headline inflation more than a point above core.
Headline PCE and Core PCE. Core PCE, the Fed's benchmark measure, has held around 3% since March (3.01% in August), and headline PCE stands at 3.42%. This series gives the Fed no reason to abandon the December hike.
Currency by currency
The biases taking shape
EUR · The French premium and gas weigh more than US yields
EUR/USD gives up 0.26% to 1.1205 on the day the US 2-year loses 16bp: the euro has drawn no benefit from the narrowing of the short-rate differential, as factors specific to the euro area prevail. The French 10-year crossed 5% on 21 October, for the first time since 2002, and the OAT-Bund spread stands between 157.5bp (21 October) and 175-177bp (ING) depending on the estimate, a discrepancy between sources that we have not been able to resolve. The Bund, at around 3.35%, has fallen only around 6bp. TTF above €90/MWh adds a terms-of-trade shock.
Moody's reviews France's rating (Aa3, negative outlook) this evening, after the European close; S&P and Fitch already rate it A+, and a downgrade would bring Moody's closer to the other two agencies. The effect will show on Monday. Before then, the flash PMIs (France 09:15, Germany 09:30, euro area 10:00) will gauge demand just as energy prices rise again. The ECB is expected to hold on 29 October. The low of the past 30 sessions, 1.1177 (7 October), is the first marker; ING puts resistance around 1.1270/75.
- Bias
- Baissier · confidence average
- Invalidation
- An EUR/USD close above 1.1253 (16 October), or Moody's leaving both the rating and the outlook unchanged, together with the OAT returning below 5%.
JPY · CPI gives the safe-haven trade a monetary foundation
USD/JPY falls 0.53% to 157.05, its lowest at the fixing since 30 September, after trading around 156.3-156.5 overnight. Inflation excluding fresh food and energy, at 2.4% against 2.3% expected, strengthens the case for a BoJ hike in December, even though OIS pricing remains contradictory across measures. The Treasury lost 17bp against 9bp for the JGB, which narrows the long-end yield spread.
The 156.88-158.85 range has held since 18 September, and the return towards 157 this morning shows that oil, with Brent futures around $113, is still limiting the yen's appreciation. Our bias is bullish on the yen as long as tech stocks do not recover; the 30 October BoJ meeting is the next test of its monetary component.
- Bias
- Haussier · confidence average
- Invalidation
- USD/JPY returning above 158 despite falling equities, or a BoJ closing the door to December on 30 October.
GBP · UK consumption dents the BoE's cycle
GfK consumer confidence fell to −24 in October (consensus between −12 and −15, previous −13), an 11-point drop unmatched outside the pandemic since June 2016, with inflation expectations at their highest since April. At 08:00 the ONS published retail sales volumes down 0.4% on the month in September (consensus −0.1%) and up 0.8% on the year (consensus +1.0%), with August revised to +0.7%. Sterling's reaction to the figure could not be verified at cut-off time.
The 5 November hike remains priced at around 98%, but the probability of a second hike by December fell from around 58% to 48% even before the retail sales. The pricing gap we flagged yesterday is starting to close, and the data point the same way. Sterling retains relative support: EUR/GBP, at 0.8377, is at its lowest of the past 30 sessions thanks to the French premium. Against the dollar, GBP/USD at 1.3376 remains exposed to the 10:30 PMI (services expected at 51.8).
% year on year (l.), % (r.)
Sources : ONS (DKO8), Bank of England, Macro Edge Terminal (OFFI panel) 01/09/2026.
UK core CPI was 2.8% in September, against a Bank Rate of 3.75%. In 2025, the BoE cut its rate from 4.75% to 3.75% with core inflation between 3.2% and 3.8%, which puts the need for a long hiking cycle into perspective.
- Bias
- Baissier · confidence faible
- Invalidation
- A GBP/USD close above 1.3402 (21 October) with a second BoE hike repriced above 58%, or a services PMI well above 51.8.
AUD · The RBA holds firm, equity beta prevails
Yesterday we made our bullish AUD bias conditional on tech results being absorbed without a sell-off; tech stocks sold off. AUD/USD gives up 0.31% to 0.7012, after 0.7034 on 21 October. The S&P Global October flash PMI adds a domestic signal: composite at 47.7 (previous 51.3), the first contraction since May, services at 47.8, with input costs rising at the fastest pace since May and selling prices up for a second month.
The probability of an RBA hike on 3 November has nevertheless risen to 57-62% depending on the source, as prices outweigh activity in the market's reading. The PBoC fixing, at 6.7180 against 6.6758 expected, could signal tolerance for a less strong yuan after its four-year high; this is a hypothesis, and one unfavourable to the AUD if confirmed. Support from rates and the drag from equity beta offset each other: we move to neutral.
- Bias
- Neutral · confidence faible
- Invalidation
- A close below 0.6985 (20 October) would turn the bias bearish; a return above 0.7034 with a rebound in semiconductors would turn it bullish again.
The scenarios
US S&P Global flash PMIs (15:45) and final Michigan survey (16:00)
| If | Then |
|---|---|
| Stronger than expected (services above 57.9, inflation expectations at 4.7% or higher) | US short rates ↑, part of the 16bp retraced → USD probably supported against the JPY and the CHF → The growth scare loses its macro support → Sensitive pairs: USD/JPY, USD/CHF |
| In line | The Nasdaq and Hormuz remain the drivers → Safe-haven ranking unchanged: JPY and CHF ahead of the USD → EUR exposed to Moody's after the close → Sensitive pairs: AUD/USD, EUR/USD |
| Weaker than expected (services contraction, lower inflation expectations) | US short rates ↓, pricing of the December hike starts to erode → USD probably weaker against the JPY and the CHF → AUD and NZD hurt by the global growth risk → Sensitive pairs: USD/JPY below 156.88, AUD/USD |
Paris time
Today's agenda
| Time | Event | Consensus | Précédent | FX sensitivity |
|---|---|---|---|---|
| 09:15 | France: October flash PMIs, manufacturing / services / composite | 50.5 / 50.7 / 50.3 | 50.6 / 51.2 / 51.1 | |
| 09:30 | Germany: October flash PMIs, manufacturing / services / composite | 53.5 / 52.5 / 53.4 | 53.9 / 52.9 / 53.8 | |
| 10:00 | Euro area: October flash PMIs, manufacturing / services | 52.7-52.8 / 52.5-52.8 (sources diverge) | 52.9 / 53.0 | |
| 10:30 | United Kingdom: October flash PMIs, manufacturing / services | 51.8 / 51.8 | 51.9 / 52.1 | |
| 14:30 | Canada: August retail sales, total / ex-autos | +1.3% / +1.2% | −0.7% / −0.7% | |
| 15:45 | United States: October S&P Global flash PMIs, manufacturing / services | 55.6 / 57.9 | 55.9 / 58.8 | |
| 16:00 | United States: Michigan, final October sentiment and 1-year / 5-10-year inflation expectations | 46.3; expectations n/a | 46.3 (preliminary); 4.7% / 3.5% (preliminary) | |
| — | Moody's: review of France's rating (Aa3, negative outlook), after the European close, time not published | n/a | Aa3, negative outlook |
Invalidation
What would change ourmind
Our reading of a dollar decoupled from its yields, a second-tier safe haven behind the yen and the franc, would be called into question by:
- A rebound in tech stocks with the US 2-year returning above 4.80%, which would give the rate differential the leading role again.
- USD/JPY above 158 despite a further fall in equities, a sign that the oil channel is outweighing the yen's safe-haven status.
- A down session for the Nasdaq in which the dollar also fell against the euro and the AUD, which would strip it of its safe-haven role.
- A clear de-escalation in the Gulf taking Brent futures below $105, which would ease pressure on the euro and reduce the general risk premium.
In short
What you need pick
The regime has shifted to a defensive rotation in which the dollar no longer follows its yields and falls in behind the yen and the franc in the safe-haven ranking. The dominant trade-off pits a US curve pricing a growth scare against futures that keep a hawkish Fed in December, with oil around $113 siding with the latter. The main risk is a rebound in tech stocks, which would hand control back to yields and hurt the yen first. The 15:45 US PMIs and the 16:00 Michigan survey open the sequence, ahead of Moody's this evening, the BoC, the RBNZ and the Fed on 28 October, the ECB on the 29th and the BoJ on the 30th.
Taken at 08:28, Paris time
The markets in numbers
| Price | 1 session | 1 month | Since 31/12 | |
|---|---|---|---|---|
| Currencies | ||||
| EUR/USD | 1.1205 | −0.26% | −2.25% | −4.64% |
| USD/JPY | 157.05 | −0.53% | −0.08% | +0.24% |
| GBP/USD | 1.3376 | −0.19% | +0.09% | −0.67% |
| USD/CHF | 0.8220 | −0.23% | +0.32% | +3.70% |
| USD/CAD | 1.4034 | −0.08% | −0.07% | +2.50% |
| AUD/USD | 0.7012 | −0.31% | −1.38% | +4.92% |
| NZD/USD | 0.5681 | −0.20% | −0.87% | −1.47% |
| EUR/GBP | 0.8377 | −0.07% | −2.34% | −4.00% |
| Dollar index (Macro Edge calculation) | 101.76 | +0.10% | +1.35% | +3.58% |
| Rate | ||||
| US 2-year | 4.65 % | −16 bp | −6 bp | +118 bp |
| US 10-year | 4.96 % | −17 bp | 0 bp | +78 bp |
| Commodities | ||||
| Brent | 125.59 | −1.44% | +12.30% | +98.69% |
| WTI | 99.93 | +3.15% | +0.86% | +72.26% |
| 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. ONS, Retail sales, Great Britain: September 2026, 2026-10-23.
- 2. S&P Global, S&P Global Flash Australia PMI, October 2026, 2026-10-23.
- 3. Agence France Trésor, France's credit ratings, 2026-10-23.
- 4. CNBC, 10-year Treasury yield tumbles below 5% to lowest level in nearly a month, 2026-10-22.
- 5. Bloomberg, Treasuries Surge as Worldwide Worries Spark Rush to Safety, 2026-10-22.
- 6. Reuters via Investing.com, Japan core inflation exceeds BOJ target, cements near-term rate hike chance, 2026-10-23.
- 7. CNBC, Japan core inflation in September surges to its highest this year at 2.1%, 2026-10-23.
- 8. Reuters via Investing.com, Asia stocks fall as AI rout batters S.Korea; Japan spooked by strong CPI, 2026-10-23.
- 9. Reuters via US News, UK Consumer Confidence Tumbles Ahead of Healey's Budget, GfK Reports, 2026-10-22.
- 10. Reuters via RTÉ, Brent at 5 month high on escalating Middle East conflict, 2026-10-22.
- 11. Al Jazeera, Iran reveals 'offensive' doctrine, US issues alert, 2026-10-22.
- 12. Washington Times, Trump rejects Iranian claims of tanker strikes in Strait of Hormuz, 2026-10-22.
- 13. Kitco, Precious metals tumble despite falling yields as Hormuz tensions intensify, 2026-10-22.
- 14. Japan Times / Bloomberg, Most BOJ watchers expect next interest rate hike in December, 2026-10-22.
- 15. Newsquawk, Daily European Opening News – 23rd October 2026, 2026-10-23.
- 16. investingLive, Americas FX news wrap 22 Oct: Nasdaq sinks as AI worries bite; Treasury yields tumble, 2026-10-22.
- 17. investingLive, Asia-Pacific market news: Asian stocks slide as chip rout spreads, 2026-10-23.
- 18. investingLive, Australia flash PMI: private sector shrinks for first time in five months as prices rise, 2026-10-23.
- 19. FXStreet, British Pound holds gains above 1.3400 as hot CPI data fuels BoE rate hike bets, 2026-10-23.
- 20. FXStreet, Australian Dollar losses steam at 0.7000 as PMIs signal a deceleration, 2026-10-22.
- 21. Phemex (CME FedWatch), Fed October Rate Hold Odds at 83.9%, 2026-10-22.
- 22. The Globe and Mail, Markets and some economists pivot to believing a BoC rate hike is imminent, 2026-10-21.
- 23. ActionForex, Eco Data 10/23/26, 2026-10-23.
- 24. ING THINK, FX Daily: Defensive rotation in play (counterpoint), 2026-10-22.
- 25. ING THINK, Rates Spark: US and France like ships passing in the night at 5% (counterpoint), 2026-10-22.
- 26. ING THINK, The Commodities Feed: Brent builds geopolitical premium as Gulf risks rise, 2026-10-23.
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.
