FX Daily · Wednesday, 28 October 2026
Dollar: a mostly European strength
By Walid Qairmi, Macro Edge, written by AI · data as of 08:11 CET
The Macro Edge dollar index gained 0.25% yesterday to 102.19, close to its October high (102.41 on the 7th). Since 30 September, its 0.94% rise has come from the euro and the yen: the dollar has fallen against sterling, the franc and the three commodity currencies, while the US 2-year yield lost 18bp. The 19:00 FOMC could add a rates leg: a hold is priced at around 91%, and the dollar will depend on what Kevin Warsh says about December, where a hike is reportedly priced at more than 80% according to the US press. The RBNZ showed overnight that market pricing does not bind a central bank: it held its rate against a hike priced at nearly 90%, and the BoC, expected to hike at 14:45, is working from data that do little to justify that pricing. Our bias is neutral on the dollar ahead of Warsh and bearish on the euro as long as the OAT-Bund spread stays above 150bp; the 13:30 UK Budget will test gilts and sterling.
What moved the market
The dollar is only gaining against the euro and the yen
The facts
The US 2-year yield rose 2bp yesterday to 4.70%, and the 10-year lost one, to 4.99%, on the eve of the FOMC decision. The 2-10 year slope has come back to +29bp, against +41bp on 30 September, a flattening driven by the 10-year, which moved from 5.29% to 4.99%. The Conference Board's consumer confidence index came in at 91.7 in October, against a consensus of around 81 and a September figure revised to 84.2; the Conference Board links the rise to lower petrol prices. Brent futures fell 1.67% to $113.88 on hopes of diplomacy with Iran, despite a strike claimed by the Houthis on Saudi Arabia's Ras Tanura refinery.
The market
The Macro Edge dollar index gained 0.25% to 102.19, with EUR/USD down 0.34% and USD/JPY up 0.24% at 157.82, while the S&P 500 rose 0.6% and the Nasdaq 1.2%. The dollar thus advanced in a risk-on session, with oil lower. Over a month, its gains are limited to two currencies. Since 30 September, the dollar has fallen against sterling (GBP/USD +0.3%), the franc (USD/CHF -0.7%), the Canadian dollar (USD/CAD -1.1%), the AUD (+0.9%) and the NZD (+1.0% up to yesterday's close); it has only gained against the euro (EUR/USD -1.8%) and the yen (USD/JPY +0.5%).
Our reading
Our reading is that the dollar's rise since late September reflects the French fiscal premium and yen weakness, and that the US front end, down 18bp, has not contributed. The FOMC could restore that rates leg. A hold is priced at 90.6% according to CME FedWatch, and a December hike is reportedly priced at more than 80% according to Yahoo Finance, a figure we were unable to verify with CME. Chris Weston (Pepperstone) notes that the Fed does not need to hike to move the market: it only has to change the perceived probability of a December hike. Yet the data give arguments to both camps. Employment (+29k in September) and wages (+3.02% year on year, below CPI at 3.7%) argue for patience, while core PCE at 3.01% in August and yesterday's confidence figure support the firmness shown on 16 September.
points (l.), % (r.)
Sources : ECB (Macro Edge calculation), US Treasury (DGS2), Macro Edge Terminal (2A-FF panel) 27/10/2026.
Does the dollar follow expectations for the Fed? The dollar index has gained 0.94% since 30 September while the 2-year yield lost 18bp to 4.70%. The two lines diverge: the dollar's strength was built somewhere other than the front end.
% year on year (l.), % year on year (r.)
Sources : BLS (CES0500000003, CPILFESL), Macro Edge Terminal (OFFI panel) 01/09/2026.
Are US wages sustaining services inflation? Average hourly earnings rose 3.02% year on year in September, the lowest in 30 months, against 3.98% in April 2024, and core CPI stands at 2.57%. Wages show no second-round effect from oil, which weakens the case for a December hike.
DXY and US 2-year. The dollar index has gained 0.94% since 30 September while the 2-year yield lost 18bp to 4.70%. The two lines diverge: the dollar's strength was built somewhere other than the front end.
Average hourly earnings and Core CPI. Average hourly earnings rose 3.02% year on year in September, the lowest in 30 months, against 3.98% in April 2024, and core CPI stands at 2.57%. Wages show no second-round effect from oil, which weakens the case for a December hike.
The euro pays the French premium
The facts
The 10-year OAT-Bund yield spread widened from around 153bp on Monday to 162bp on Tuesday according to ActionForex, with another measure putting it near 170bp, after a peak close to 175bp on 22 October and around 135bp at the start of October. The French 10-year yield rose 5.2bp to 4.955%, while the Bund lost 3.1bp to 3.339% and the Spanish 10-year was flat at 4.000%. Moody's kept France's rating at Aa3 on Friday, but the debate on the 2027 budget continues in Parliament. The ECB meets tomorrow: 70 of the 73 economists polled by Reuters expect a hold, and on 26 October OIS was pricing a December hike at around 75%.
The market
EUR/USD fell 0.34% to 1.1150, its lowest in the last 30 sessions, below the 7 October low (1.1177), and was trading around 1.1124 this morning according to Reuters. EUR/GBP fell 0.19% to 0.8366, also at a 30-session low, and EUR/CHF is around 0.924. Over the session, the euro fell against the seven other majors, the franc included.
Our reading
A Bund gaining in price while the OAT falls points to a flight to quality within the euro area, and the single currency bears the cost. The differential with the United States explains little: the daily correlation between EUR/USD and the 10-year rate spread is only 0.19 over 60 sessions. ING thinks hawkish guidance tomorrow could take EUR/USD back towards 1.120-1.130. Our reading is more cautious, because a firmer ECB also raises the French state's funding costs and does not remove the euro's risk premium as long as the 2027 budget is still under discussion.
pounds per euro (l.), dollars per euro (r.)
Sources : ECB, Macro Edge Terminal (FORCE panel) 27/10/2026.
Is euro weakness specific to the euro? Since 30 September, EUR/USD has lost 1.8% and EUR/GBP 2.1%, from 0.8546 to 0.8366. The simultaneous fall in both pairs points to weakness specific to the euro: against sterling, the dollar's rise plays no part.
dollars per euro (l.), points de % (r.)
Sources : BCE, OCDE (IRLTLT01DEM156N), Trésor américain (DGS10), Macro Edge Terminal (SPRDS panel) 01/10/2026.
L'euro suit-il l'écart de taux entre l'Allemagne et les États-Unis ? The correlation of daily changes between EUR/USD and the 10-year rate spread with the United States is only 0.19 over 60 sessions. The euro has fallen without that differential explaining it, which is consistent with a sovereign risk premium.
EUR/GBP and EUR/USD. Since 30 September, EUR/USD has lost 1.8% and EUR/GBP 2.1%, from 0.8546 to 0.8366. The simultaneous fall in both pairs points to weakness specific to the euro: against sterling, the dollar's rise plays no part.
EUR/USD and Écart Bund – Treasury 10 ans. The correlation of daily changes between EUR/USD and the 10-year rate spread with the United States is only 0.19 over 60 sessions. The euro has fallen without that differential explaining it, which is consistent with a sovereign risk premium.
The RBNZ defies its pricing, Australia confirms its own
The facts
The RBNZ left the OCR at 2.75% overnight, by 4 votes to 3, when a 25bp hike was expected by consensus and priced at nearly 90%. Breman, who heads the institution, judged further hikes “highly likely” at coming meetings, at a level that could exceed the one mentioned in September. Half an hour earlier, the ABS published Australian CPI at 4.3% year on year in September, against 4.0% in August, and a quarterly trimmed mean of +1.0% in the third quarter, above the 0.8% forecast by the RBA.
The market
NZD/USD, which closed yesterday at 0.5703 (+0.39%), fell as low as 0.5583 in Asian trading, a move of -1.7%. Against the AUD, the NZD lost as much as 1.9%, its biggest intraday fall since October 2017, and AUD/NZD touched a 13-year high around 1.26, against 1.233 at yesterday's close. The probability of an RBA hike on 3 November rose from around 60% before the CPI to 78-90% depending on the source, and AUD/USD is trading between 0.7028 and 0.7045.
Our reading
The oil shock is pushing central banks in the commodity bloc towards tightening, at different speeds. With the elections about ten days away, the RBNZ chose to wait, which Capital Economics reads as a postponement of tightening. Westpac notes that this is the first time, outside the pandemic, that the RBNZ has not moved with more than 70% of a hike priced. Our reading is that the episode reduces the value of high pricing as a guarantee, which matters first for the BoC at 14:45, then for the Fed in December.
The FX Daily signature
Pricing gap
The move from 30% to around 80% rests on a statement by the governor, and the figures published since have tended to contradict it. USD/CAD has already priced in the scenario, falling from 1.4262 on 12 October to 1.4023 yesterday. The RBNZ showed overnight that a central bank can pass on a hike priced at nearly 90%.
The narrative
The market is pricing a 25bp BoC hike today, to 2.50%, at around 77% according to Reuters and up to 84% according to Newsquawk. That probability was around 30% on 16 October, before Macklem judged that the longer the BoC waits, the harder it becomes for the Bank to ignore rising energy prices.
The data
September data point the other way. Headline CPI rose to 3.1% (3.0% in August) on the back of petrol (+27.8% year on year), but CPI excluding petrol fell to 2.2% (2.4%) and the average of core measures to 2.0% (2.2%). Employment has fallen for two months in a row and unemployment has risen to 6.5% (6.4%). Economists remain divided: 19 out of 34 expect a hike in the Reuters poll.
What closes it
The 14:45 decision will close the gap. A hike accompanied by cautious guidance would validate the pricing without extending USD/CAD's fall; a hold combined with a hawkish tone, on the New Zealand model, would probably send the pair back up towards its mid-October zone. Sources disagree on whether a Monetary Policy Report is published today, a point we have been unable to verify.
Currency by currency
The biases taking shape
USD · December is already in the price
The Macro Edge dollar index ended at 102.19, 0.2% below its 30-session high (102.41 on 7 October). The Fed raised its target range by 25bp on 16 September, to 3.75-4.00%, by 12 votes to 0, judging inflation “elevated”. September CPI proved it right on the surface, at 3.7% year on year and +0.6% month on month, with core at 2.6% (+0.3%).
The labour market is holding up less well: +29k jobs in September against 90k expected, unemployment at 4.2%, within its 4.1-4.3% range since March, and hourly earnings up 3.02%, meaning negative real wages. With a hold priced at around 91% and a December hike priced at more than 80% according to the press, the dollar has little to gain from a simple confirmation and more to lose if Warsh emphasises employment. The bias remains neutral until the 19:30 press conference.
% of the labour force (l.), thousands of jobs per month (r.)
Sources : BLS (UNRATE, PAYEMS), Macro Edge Terminal (OFFI panel) 01/09/2026.
Job creation fell to +29k in September, after -10k in July and +133k in August, with unemployment at 4.2%. This labour market gives Kevin Warsh a reason not to commit on December.
- Bias
- Neutral · confidence average
- Invalidation
- An explicit commitment on December that took the 2-year yield above 4.88%, its 30 September level, would turn the bias bullish; a message focused on employment that brought it back towards 4.65% (22 October) would turn it bearish.
JPY · A yen held up by the threat of intervention
USD/JPY gained 0.24% to 157.82 and was trading around 157.95 this morning, at the top of its range over the last 30 sessions (156.80-158.60). Finance minister Satsuki Katayama told the Diet yesterday that currency moves were being watched “with a strong sense of urgency” and promised decisive action if necessary. Analysts see this as verbal pressure rather than the announcement of an imminent intervention, with 160 often cited as a marker.
The BoJ, at 1.25% since its September hike, meets on Thursday and Friday. In mid-October, OIS was pricing around a 10% chance of a hike in October and 88% by December, figures we have been unable to update. A hawkish Warsh would push the pair towards 158.60 and then towards 160, where the risk of intervention becomes real, which caps USD/JPY's upside.
% (l.), % (r.)
Sources : US Treasury (DGS10), OECD (IRLTLT01JPM156N), Macro Edge Terminal (SPRDS panel) 01/10/2026.
The 10-year Treasury-JGB spread narrowed from around 296bp in September 2024 to 224bp in September 2026 (monthly averages), without USD/JPY falling. The pair no longer tracks that spread, which gives more weight to signals from Tokyo.
- Bias
- Neutral · confidence faible
- Invalidation
- A close above 158.60, the 30-session high, with no reaction from Tokyo would turn the bias bearish on the yen; a signal from the BoJ on Friday in favour of December would take the pair back below 156.80 and turn the bias bullish.
GBP · The Budget speaks to gilts first
John Healey's first Budget is due at around 13:30, after Prime Minister's Questions, followed by OBR forecasts to 2031-32. Expected fiscal headroom is around £10 to 12bn, against £23.6bn in March; a Bloomberg survey of primary dealers points to at least £15bn. Higher taxation of banks would fund targeted, temporary support with energy bills.
The 10-year gilt yield fell 2.3bp yesterday to 5.328%, below its early-October high (5.527%, the highest since 2007 according to a secondary source). The BoE, at 3.75%, is priced at around 90% for a hike on 5 November, after September CPI at 3.5% and a 6-3 vote in September, with three members already calling for 4.00%. This monetary support is consistent with sterling holding up against the euro (EUR/GBP at 0.8366). Our reading is that a Budget seen as loose would make gilts play the role for sterling that the OAT plays for the euro, with a risk premium outweighing carry.
% year on year (l.), % year on year (r.)
Sources : ONS (D7G7, DKO8), Macro Edge Terminal (OFFI panel) 01/09/2026.
UK CPI rose from 2.6% in June to 3.5% in September, with core at 2.8%. These figures support the BoE hike priced for 5 November and leave little room for a Budget that would boost demand.
- Bias
- Neutral · confidence faible
- Invalidation
- A 10-year gilt yield above 5.50% after the Budget would tip the bias to bearish; headroom above £15bn validated by the OBR, with the gilt yield below 5.30%, would turn it bullish against the euro.
CAD · The BoC hike is already in USD/CAD
USD/CAD ended at 1.4023, down 1.7% since 12 October (1.4262), while the probability of a BoC hike rose from around 30% to nearly 80%. Canadian data have not followed this repricing, with the average of core measures at 2.0% and unemployment at 6.5% (see the pricing gap).
The 14:45 decision is binary for the pair. With a hike already in the price, the risk of disappointment is greater than that of a hawkish surprise, but the 19-15 split in the Reuters poll does not settle the question. The bias remains neutral until the decision.
Canadian dollars per US dollar (l.), $ per barrel (r.)
Sources : ECB, EIA (spot Brent), Macro Edge Terminal (OILFX panel) 27/10/2026.
EIA spot Brent rose from $89.73 at the end of August to $125.59 on 16 October, without USD/CAD following: the 60-session daily correlation is 0.01. The pair's fall since 12 October coincides with the BoC repricing.
- Bias
- Neutral · confidence faible
- Invalidation
- A hold at 14:45 would turn the bias bearish on the CAD, with USD/CAD towards 1.4160-1.4210, its mid-October zone; a hike accompanied by a signal of further hikes would turn it bullish.
The scenarios
FOMC: decision at 19:00 and Kevin Warsh's press conference at 19:30 (Paris time)
| If | Then |
|---|---|
| Hold, December committed | US short rates ↑, 2-year yield towards 4.88%, its late-September level → USD supported, dollar index above 102.41 → Sensitive pairs: EUR/USD below 1.11 ahead of the ECB; USD/JPY towards 158.60, then verbal risk from Tokyo |
| Hold, December open | Probability of a December hike ↓, 2-year yield towards 4.65% → USD gives back part of its October gains → Sensitive pairs: USD/JPY, EUR/USD, AUD/USD |
| 25bp hike (around 9% priced) | US front end ↑, curve flattening → USD supported, equities under pressure ahead of Alphabet and Microsoft → Sensitive pairs: USD/JPY, close to the intervention zone, AUD/USD and NZD/USD |
Paris time
Today's agenda
| Time | Event | Consensus | Précédent | FX sensitivity |
|---|---|---|---|---|
| 13:30 | United Kingdom: John Healey's Autumn Budget, followed by OBR forecasts | Fiscal headroom around £10-12bn (at least £15bn according to a Bloomberg survey) | £23.6bn (March) | |
| 13:30 | United States: goods trade balance, advance estimate (September) | -$130.4bn (other source: -$128.7bn) | -$132.6bn | |
| 14:45 | Bank of Canada: rate decision | 25bp hike to 2.50% (19 economists out of 34; around 77-84% priced) | 2.25% | |
| 15:30 | United States: EIA crude oil inventories (week) | -0.3m bbl | -3.06m bbl | |
| 19:00 | United States: FOMC decision | Hold at 3.75-4.00% (90.6% according to CME FedWatch) | 3.75-4.00% | |
| 19:30 | United States: Kevin Warsh's press conference | n/a | n/a | |
| 21:00 | United States: Alphabet and Microsoft results, after the Wall Street close | n/a | n/a |
Invalidation
What would change ourmind
Our reading (a dollar driven by the euro and the yen, a BoC less hawkish than its pricing) would be called into question by:
- A US 2-year yield holding above 4.88%, its 30 September level, after Kevin Warsh's press conference: the dollar would then have a rates driver that we are underestimating.
- A return of the OAT-Bund spread below 150bp, which would remove the euro's own risk premium and make our bearish bias obsolete.
- EUR/USD back above 1.1253, its 16 October high, before tomorrow's ECB meeting.
- A BoC hike accompanied by a signal of further hikes, which would invalidate our Canadian pricing gap.
In short
What you need pick
The dollar remains strong by default: it is advancing against the euro, held back by the French premium, and against the yen, but has been falling since late September against currencies whose central banks are tightening or about to. Today's trade-off pits a Fed that already raised rates in September against employment data that do not justify a firm commitment for December. The main risk to our reading is a Kevin Warsh who is explicit about December, which would add a rates leg to a dollar so far carried by the weaknesses of others. The first test comes earlier, at 14:45, when the BoC shows whether 80% pricing is enough to make it hike.
Taken at 08:29, Paris time
The markets in numbers
| Price | 1 session | 1 month | Since 31/12 | |
|---|---|---|---|---|
| Currencies | ||||
| EUR/USD | 1.1150 | −0.34% | −2.22% | −5.11% |
| USD/JPY | 157.82 | +0.24% | +0.15% | +0.73% |
| GBP/USD | 1.3328 | −0.15% | +0.57% | −1.02% |
| USD/CHF | 0.8286 | +0.30% | +0.04% | +4.53% |
| USD/CAD | 1.4023 | −0.04% | −0.84% | +2.42% |
| AUD/USD | 0.7032 | +0.11% | +0.03% | +5.22% |
| NZD/USD | 0.5703 | +0.39% | +0.56% | −1.09% |
| EUR/GBP | 0.8366 | −0.19% | −2.77% | −4.13% |
| Dollar index (Macro Edge calculation) | 102.19 | +0.25% | +1.19% | +4.02% |
| Rate | ||||
| US 2-year | 4.70 % | +2 bp | −11 bp | +123 bp |
| US 10-year | 4.99 % | −1 bp | −18 bp | +81 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. Federal Reserve, Federal Reserve issues FOMC statement, 16/09/2026.
- 2. Bureau of Labor Statistics, The Employment Situation, September 2026, 02/10/2026.
- 3. The Conference Board, US Consumer Confidence Increased in October, 27/10/2026.
- 4. Reserve Bank of New Zealand, OCR held at 2.75%, 28/10/2026.
- 5. Australian Bureau of Statistics, Consumer Price Index, Australia, September 2026, 28/10/2026.
- 6. Office for National Statistics, Consumer price inflation, UK: September 2026, 21/10/2026.
- 7. UK Parliament, Budget Statement Wednesday 28 October, 28/10/2026.
- 8. Newsquawk, RBNZ keeps OCR unchanged at 2.75% (exp. 25bps hike) with the decision made by 4-3 vote, 28/10/2026.
- 9. Newsquawk, Preview: BoC rate decision and Governor statement due Wednesday 28th October 2026, 10/2026.
- 10. Reuters (via Global Banking & Finance), Dollar Steady Before Fed Decision, Kiwi Drops After RBNZ Holds, 28/10/2026.
- 11. Reuters (via Global Banking & Finance), Morning Bid: RBNZ throws markets a curveball, 28/10/2026.
- 12. Bloomberg, New Zealand Dollar Slides Most Versus Aussie Since 2017 on RBNZ, 28/10/2026.
- 13. ABC News, ASX markets business live news, 28/10/2026.
- 14. Yahoo Finance, Fed meeting live updates: Federal Reserve October meeting, Kevin Warsh, 27/10/2026.
- 15. Reuters (via Nation Thailand), Brent drops US$1.93 a barrel on October 27 amid Iran talks, 27/10/2026.
- 16. ActionForex, Euro Weakest as French Bond Spreads Widen Again; Australian CPI and UK Budget Next, 27/10/2026.
- 17. ING THINK, October ECB cheat sheet: French malaise shouldn't prompt a dovish turn, 27/10/2026.
- 18. forex.com, FTSE, GBP/USD, EUR/GBP forecast: what to expect from the Chancellor's Budget, 10/2026.
- 19. BigGo Finance, BoJ: OIS implied probabilities, 13/10/2026.
- 20. CNA (via investinglive), Satsuki Katayama's remarks to the Diet on the exchange rate, 27/10/2026.
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.
