The dollar index (DXY00) rose to its highest level in 1.75 months, gaining 0.53% on Wednesday. This rally was driven by a jump in the 10‑year Treasury note yield to a 19‑year high of 5.13%, which boosted the greenback’s interest‑rate advantage.
Positive developments from the OECD also supported the currency: the organization upgraded its 2026 U.S. GDP forecast by 0.2 percentage point to 2.2 % while lowering its U.S. inflation outlook to 3.6 %.
Additional strength came from market expectations that the Federal Reserve will maintain its tightening bias. Fed Governor Michael Barr signaled that further policy adjustments may be needed to bring inflation back to target, and the September S&P manufacturing PMI surprised by expanding at its fastest pace in 4.25 years (57.0 versus an expected decline).
Separate data showed a modest decline in mortgage activity. The MBA’s weekly mortgage‑application index fell 1.5 %, with purchase applications down 0.8 % and refinancing down 2.6 %. The average 30‑year fixed rate climbed 15 basis points to 7.12 %, a 2.25‑year high.
Currency pairs reflected the dollar’s momentum. EUR/USD (^EURUSD) slipped to a 1.75‑month low, losing 0.53 % amid the greenback’s rally, while USD/JPY (^USDJPY) gained 0.55 % despite Japanese markets being closed for a holiday.
In the Eurozone, the S&P manufacturing PMI held steady at 52.7 and the composite PMI rose to 53.1, outpacing expectations. ECB Governing Council member Joachim Nagel emphasized that inflation remains above 3 % and may require further rate hikes, supporting a 60 % market odds for a 25‑bp increase at the October 29 policy meeting.
Japan’s OECD forecast was also upgraded, lifting its 2026 GDP outlook to 0.8 % and adding a modest 18 % chance of a BOJ rate hike at the October 30 meeting.
Precious metals fell sharply. December COMEX gold dropped $58 (–1.33 %) and silver fell $1.566 (–2.35 %). The decline was attributed to the stronger dollar, higher Treasury yields, and hawkish central‑bank commentary from both the Fed and ECB.
Support for metals came from stronger industrial‑metals demand, reflected in the upbeat PMI data, and from rising ETF holdings. Gold ETF longs reached a 6.5‑month high, while silver ETF longs hit a 5.75‑month peak. Chinese PBOC reserves increased by 650,000 ounces in August, the largest gain in three years.
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