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Dollar hits late-July highs as politics pressure European FX
The article cites October rate rise odds of 54% and flags worsening France debt dynamics, with French versus German bond yield spreads already wider than during the prior European debt crisis.
The US dollar has climbed to its highest level since late July, extending gains over the last seven trading sessions and rising more than 2%, according to Action Forex. The move is attributed to both US-specific support, including a stronger economy and a tightening monetary policy outlook, and pressure from rising political risks elsewhere weighing on European currencies.
Action Forex also points to European developments pressuring the euro and the pound, including investors fleeing France as the country faces debt and financing concerns. The outlet says the French versus German bond yield spread is already wider than it was during the European debt crisis, raising the prospect that the central bank could again resort to purchasing debt securities.
In Japan, the yen has fallen for seven of the last eight days, Action Forex says, citing disappointment with the Bank of Japan’s lack of unity around its monetary policy outlook and rumors that it may not act quickly despite Japan having the lowest inflation rate among G7 countries.
For markets pricing, Action Forex highlights that the futures market puts the probability of a rate rise in October at 54%, with around 40% odds of two further rate rises in 2026. In the UK, the outlet notes expectations for a base rate rise in November from 3.75% to 4% exceeding 81%, while GBPUSD is still falling ahead of a UK budget proposal due to concerns around stimulus plans clashing with the BoE’s tightening path.