Treasury yields reversed Thursday’s declines as markets reassessed the inflation-labor narrative. The 10-year yield climbed 6.7 basis points to 4.078%, while the 2-year rose 4.1 bps to 3.57%, and the 30-year yield reached 4.696%. The broad-based rise suggests investors are still adjusting for inflation persistence even as labor indicators weaken, creating tension for policymakers balancing dual mandates.
Cross-Currency Moves Reflect Central Bank Divergence
The euro edged lower to $1.1725 after the ECB held rates at 2% and signaled a more neutral policy stance, with markets reducing odds of another cut this cycle. The dollar gained 0.4% against the yen to 147.76 following a U.S.-Japan statement opposing disorderly FX moves. Sterling slipped 0.2% to $1.3553 on news of stagnant UK GDP in July, further weakening near-term sentiment.
Market Outlook: DXY Faces Cautious Bias into FOMC
With the DXY holding below the 50-day average and rate expectations stabilizing around a 25 bps cut, short-term direction hinges on next week’s Fed guidance. A divided FOMC or hawkish tone could offer support, but a dovish tilt — especially with labor concerns — would likely cap upside. Expect heightened volatility as markets digest the updated dot plot and Powell’s press conference.
More Information in our Economic Calendar.
