US Dollar Surges to Three-Month High as Treasury Yields Soar

The US dollar has surged to its highest level in over three months, driven by rising Treasury yields. The dollar index is now trading above 102 as 10-year yields push up to a high of 5.34%, their highest level since 2002.

Despite a softer US PCE inflation report yesterday that briefly knocked back expectations for another Fed rate hike this month, the bond market remains strong. The front-end of the curve may be more sensitive to this repricing, but longer-dated yields are continuing to climb.

The EUR/USD currency pair has fallen below 1.1300 and is now breaking beneath a key support cluster on the weekly chart. This break threatens a firmer drop below the June low of 1.1325, with the next obvious downside level being 1.1200.