Fed Rate Hike Expectations Spark Market Volatility
Rising expectations of a Federal Reserve rate hike have increased downside pressure across markets. The probability of a 25-basis-point increase at the October meeting has risen above 70%, according to the CME FedWatch Tool.
This has supported the U.S. Dollar Index, pushing it back toward its 2026 uptrend near 101. Meanwhile, the GBP/USD and Dow Jones charts are testing support levels and daily momentum indicators point to oversold conditions.
The dollar and euro are close to yearly extremes, increasing reversal risks below 101 in the DXY and above 1.13 in EUR/USD. The GBP/USD is testing support extending from November 2025 near 1.32.
U.S. indices have pulled back after a strong week for the Nasdaq, which surged toward record highs. The broader cross-asset picture is increasingly stretched, with the U.S. 10-year Treasury yield rising toward highs last seen in 2007.