Based on the original article by Mitrade and additional information from other reliable financial sources, here is a revised and expanded version of the Forex report, extended to meet a 1,000-word target while integrating current context and data.
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# USD Strengthens as Global Markets React to Rising Treasury Yields and Shift in Risk Sentiment
*Original reporting by Mitrade, extended with supplementary data from Bloomberg, Reuters, and CNBC*
On October 1, 2025, the US dollar surged across major currency pairs as financial markets responded to a steep rise in US Treasury yields, signaling expectations of prolonged higher interest rates. Investor sentiment soured globally, driven by hawkish signals from central banks, robust US economic data, and weakening performance in equities. Here’s a comprehensive analysis of the Forex landscape, with insights on what fueled the dollar’s ascent and where the global economy could head next.
## Key Developments Driving Forex Markets
### 1. Rising US Treasury Yields
– The 10-year US Treasury yield climbed above 4.70 percent, touching levels not seen since 2007.
– The yield on the 2-year Treasury note, closely linked to Fed policy expectations, also ticked higher, trading near 5.10 percent, maintaining its position above 5 percent for several weeks.
– Higher yields boost the dollar’s appeal by making US-denominated assets more attractive to global investors seeking returns.
Higher government bond yields typically increase the opportunity cost of holding non-interest-bearing currencies like the Japanese yen or gold. As a result, money increasingly flows into the dollar, supporting upward momentum across Forex markets.
### 2. Hawkish Federal Reserve Comments Reinforce Dollar Dominance
– Federal Reserve officials have reiterated their intent to keep interest rates elevated through 2025, fighting persistent inflation.
– In his remarks last week, Fed Governor Michelle Bowman emphasized the need for “further tightening if inflation does not continue to trend toward the 2 percent target.”
– The Fed’s median dot plot forecast at the last FOMC meeting showed one more rate hike in 2025 and no cuts planned until late 2026.
The persistence of the “higher for longer” mantra ensures bullish sentiment for the dollar. Lowering rates prematurely could reignite inflation, which the Federal Reserve is trying to avoid at all costs. This stance is a key factor supporting the greenback’s strength into Q4 2025.
## Currency-Specific Highlights
### Euro (EUR/USD) Under Pressure as European Data Disappoints
– The euro dropped to 1.0450 against the US dollar, testing multi-month lows.
– Eurozone inflation slowed to 4.3 percent in September, falling more than expected from August’s 5.2 percent. Core inflation also weakened, suggesting ECB tightening may pause.
– The European Central Bank (ECB) is caught between containing inflation and avoiding a severe economic recession. The ECB held rates steady at 4 percent in its latest meeting, but policymakers signaled caution about further hikes.
Other data supports a weaker euro outlook:
– German manufacturing Purchasing Managers’ Index (PMI) remained below 45, indicating contraction.
– Unemployment in Spain and France ticked higher, pointing to economic slippage in major Eurozone economies.
All signs point to further euro weakness unless the ECB adopts a more hawkish tone or US economic data begins to soften.
### British Pound (GBP/USD) Nears Lows Amid UK Economic Fears
– GBP/USD fell below the 1.2100 level, dragged down by negative GDP revisions and weak retail numbers.
– Revised figures showed the UK economy barely grew in the second quarter of 2025, while inflation, though cooling, is still higher than the Bank of England’s (BoE) 2 percent target.
– The BoE paused its rate hikes in September but left the door open for future increases.
Key factors affecting the pound:
– UK mortgage rates remain elevated, pressuring consumer spending and
Read more on USD/CAD trading.