Dollar Breaks Through Multi-Month Highs as Hawkish Fed Repricing Takes Hold

The US dollar has broken through to fresh multi-month highs after hawkish repricing at the front end of the US Treasury curve led to a sharp lift in yields across the curve. This shift in rates expectations, combined with strength in oil prices, put pressure on precious metals gold and silver.

According to FOREX.com, Fed funds futures now imply another 3.5 hikes from the Federal Reserve out to mid-2027, driving up US Treasury yields and pushing the five-year sector to levels rarely seen in modern times. The Iranian President's statement that Iran would not surrender in its war with the US also contributed to higher energy prices.

Gold and silver have been hit particularly hard by this shift in rates expectations, with their correlations with DXY and front-end yields plunging to -0.91 and -0.88 respectively over the past five sessions. The inverse relationship between precious metals and nominal yields has also been extremely strong.