USD: Dollar breaks higher on yields and Iran fears

The dollar punched through to its highest level since April 2025 on Thursday, touching 103.2 intraday. A relentless hawkish chorus from Fed speakers and a sudden geopolitical jolt drove the move. As post-holiday trading resumed, yields surged across the curve. Specifically, the 10-year yield broke past 5.00% to hit 5.11%, while the 2-year climbed to 4.86%.

Later in the afternoon, President Trump dismissed diplomatic talks with Iran on social media. That statement snapped oil prices higher and injected a fresh inflation premium directly into rate expectations. Meanwhile, core CPI has run at a 3.7% annualized pace over the past three months, and officials like Daly and Hammack continue warning of broad price pressures. Consequently, rates markets have locked in a December hike and begun pricing tail risk for 50 basis points.

Beneath that rate-driven rally, a major structural prop for the greenback faces an unexpected test. The confirmed ouster of Nvidia CEO Jensen Huang sent chip stocks sliding across global markets. Even so, the dollar climbed alongside the Swiss franc instead of selling off with risk assets. This reaction shows that wide yield differentials are doing all the heavy lifting right now. However, those spreads are masking a medium-term threat to US equity inflows. 

Foreign capital chasing American AI valuations has mechanically supported the dollar since mid-2025. If Huang’s departure triggers a broader reassessment of the tech sector, that flow tailwind could fade quickly.

Even though the DXY cleared its April 2025 range top, the technical picture is not a one-way bet. Daily momentum oscillators favor an advance toward 104, yet a daily hold above former resistance at 102.5 remains essential after October’s false break.

Today’s October PPI report is the immediate binary test for whether this breakout sticks or unravels. An upside surprise following Tuesday’s hot CPI would cement the 50-basis-point debate and send the DXY toward 104. Conversely, a soft print would validate false-break fears and spark a reversal ahead of next week’s retail sales, FOMC minutes, and inflation expectations.

EUR: EUR/USD eyes 1.10 as EUR/NOK rebound fades

We recently commented on EUR/NOK price action, noting that the pair had rebounded amid a sharp fall in oil prices. The push higher, however, has been capped by the 50-day moving average near 10.65.

Despite the decline in energy prices, the broader trajectory continues to point upward as there remains no clear progress toward sustained de-escalation in the Middle East. Against this backdrop, we continue to see any correction higher in EUR/NOK as a better entry level for sellers rather than any substantive reversal.

Meanwhile, EUR/USD has made a clear break below support at 1.11, reaching levels unseen since February 2025. The pair now eyes 1.10 as the next key support. A hotter-than-expected US CPI report earlier this week had re-awakened Fed hawkish bets, reinforcing the pressure on the pair.  

Today brings the US Producer Price Index (PPI) release, which measures the prices charged by wholesailers to retailers. This is a particularly relevant series given the supply-side nature of the current shock.

Hotter-than-expected numbers would likely add to the Fed hawkish narrative, putting further pressure on EUR/USD toward 1.10.

GBP: Dollar dominance masks sterling resilience

Sterling has endured another mixed week, with performance across the G10 highlighting the competing forces driving the pound. GBP/USD has fallen more than 2% since testing 1.35 last week, as stronger US inflation data and increasingly bullish dollar dynamics have overwhelmed sterling’s relatively supportive domestic backdrop. Cable is once again trading below its major daily moving averages, signalling a clear deterioration in short-term momentum.

That weakness is notable given yesterday’s stronger UK growth data. Monthly GDP rose 0.2% against expectations for stagnation, reinforcing the view that activity remains surprisingly resilient. Combined with persistent inflation pressures, that has pushed the implied probability of a December BoE hike towards 75% and should keep front-end gilt yields elevated even as energy prices retreat.

Yet sterling has largely shrugged off that rates support, suggesting global forces remain dominant, particularly against the dollar.

GBP/EUR has also corrected further from 1.20, with the earlier overbought conditions now largely unwound. The 21-day moving average near 1.1950 is the immediate technical test; a clean break below could expose the 1.18 area.

Despite the recent pullback in GBP/EUR, the underlying divergence between sterling and the euro remains striking. The two-month correlation between GBP/USD and EUR/USD has collapsed to just 0.16, while the euro’s year-on-year performance trails sterling by more than five percentage points, the widest gap since 2021. French fiscal and political uncertainty appears to be driving a more idiosyncratic euro risk premium, suggesting the recent GBP/EUR correction may mask a still-supportive relative backdrop for sterling.

The next test comes from a heavy UK data calendar. Labour market figures, inflation and retail sales will determine whether recent resilience is enough to sustain hawkish BoE pricing, or whether the pound’s yield support begins to fade.

Market snapshot

Table: Currency trends, trading ranges & technical indicators

Key global risk events

Calendar: November 09-13

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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.