Dollar reaches three-month high, EURUSD falls below 1.1300

The U.S. dollar began the fourth quarter mostly stronger, supported by elevated Treasury yields even after a softer U.S. PCE inflation report on the previous day.

According to InvestingLive's Justin Low, the dollar index extended toward 102, reaching its highest level in over three months. Overnight, the U.S. 10-year yield climbed to around 5.34% before easing to about 5.28% in the latest morning update. At the same time, EURUSD fell below 1.1300.

The takeaway for traders is that softer inflation has not triggered a durable decline in long-term borrowing costs. Although yields are slipping this morning, they continue to be high. U.S. stock futures indicate a higher open as market participants look ahead to jobless claims and the ISM manufacturing report.

The greenback is broadly stronger.

• EURUSD traded at 1.1289, with the dollar 0.34% higher.

• USDJPY at 158.07, dollar up 0.43%.

• GBPUSD at 1.3219, dollar up 0.35%.

• USDCHF at 0.8357, unchanged.

• USDCAD at 1.4247, dollar up 0.13%.

• AUDUSD at 0.6943, unchanged.

• NZDUSD at 0.5609, dollar up 0.39%.

USDCHF climbed to its highest point since May 2025.

Even though USDCHF was flat in the initial snapshot, the pair's overall rise brought it to a level not seen since May 2025. The move has been supported by low Swiss inflation and a stable SNB policy stance, set against the context of higher U.S. interest rates.

The pair touched 0.8382 earlier before pulling back, bringing it nearer to the next upside target of 0.8400. That round number also represents the 50% retracement of the decline from the January 2025 high, making it a key technical barrier.

Despite the retreat, the price stays above the 100-hour moving average of 0.8326, which sets the near-term risk for buyers.

Holding above that level is more bullish and keeps a potential move toward 0.8382 and then 0.8400 on the table. A drop below would give sellers greater control over the correction.

For novice traders, a pullback from a peak does not necessarily signal a trend reversal. The key is whether the price remains above the technical levels that underpin the trend. The 100-hour moving average provides buyers with a reference level where risk is clearly defined and limited.

U.S. stock futures indicate an opening on the upside.

• Dow industrial average futures point to a 136-point gain.

• S&P 500 futures point to a 33-point gain.

• Nasdaq futures point to a 189-point gain.

Treasury yields have moved lower across all four benchmark maturities after the 10-year yield reached a new cycle high of 5.33% earlier today.

• Two-year yield: 4.8579%, down 2.91 bps.

• Five-year yield: 5.0644%, down 2.46 bps.

• 10-year yield: 5.2766%, down 1.64 bps.

• 30-year yield: 5.6263%, down 1.27 bps.

The decline brings some respite from selling pressure overnight, though borrowing costs are still high.

This difference is significant. Shorter maturities are more directly influenced by expectations for the upcoming Fed decision. Longer-term yields also incorporate forecasts for growth, inflation, and the premium investors require for holding longer-dated securities.

Elevated market yields can also contribute to monetary tightening by raising financing costs for households and businesses.

Neel, president of the Minneapolis Fed, said the economy's resilience continues to surprise him, and the Fed will take necessary steps to bring inflation back to target. He described consumer spending as strong and the labor market as broadly healthy, but acknowledged pressure in housing and related sectors. He added that he does not know how high rates will need to go to curb inflation.

The author's interpretation is that a single softer inflation reading does not resolve the policy debate. The Fed must still balance improving inflation data against resilient demand and the risk that price pressures linger.

Crude oil prices climbed amid ongoing Iran-related headlines that kept risk in focus.

In the early-morning snapshot, crude oil traded at $92.18, a rise of $1.76.

Headlines referenced a Time Magazine report in which President Trump described an increase in bombing Iran after the midterm elections as "possible." The phrasing suggests escalation remains an option without committing to a specific decision or timeline.

Trump also stated that the U.S. would soon replenish its Strategic Petroleum Reserve, a claim that has been made before, referring to oil from Venezuela. The report did not specify a purchase schedule or volume, and if "soon" means a few years, he may be correct.

For markets, any fresh escalation would pose risks to energy supplies and could complicate the inflation picture. Oil prices are rising this morning in response to those headlines.

Other markets in the early snapshot:

• Gold stood at $4,175.46, a gain of $14.54 or 0.35%.

• Silver at $60.8699, up $0.4409 or 0.73%.

• Copper at $6.5620, down $0.0595 or 0.90%.

• Bitcoin at $83,889, up $326 or 0.39%.

Precious metals like gold and silver rose even as the dollar strengthened, highlighting that currency fluctuations are just one factor affecting them.

Overnight data showed European manufacturing expanding while Japan's growth moderated.

• Eurozone final manufacturing PMI: 52.9 (expected 52.7).

• Germany: 53.9 (expected 53.8).

• France: 50.6 (expected 50.3).

• Italy: 50.4 (expected 50.1).

• Spain: 51.0 (expected 50.2).

• UK final manufacturing PMI: 51.9 (expected 52.0).

Readings exceeding 50 signal expansion. Despite the better-than-expected eurozone data, EURUSD continued to decline this morning.

Japan's September manufacturing PMI fell to 54.1 from 54.9, marking a six-month low. This indicates a slowdown in expansion, with new-order growth easing while employment and export demand stayed robust. Companies kept reporting component shortages and higher costs for energy, transport and currency-related items.

Swiss inflation matched expectations:

• Headline CPI: flat month-on-month, in line with expectations, after a 0.4% rise previously.

• Year-on-year: 1.0% (expected 1.0%, prior 0.8%).

• Core CPI: 0.5% year-on-year (prior 0.4%).

Inflation has ticked up, but the subdued core figure clarifies why the Swiss National Bank can keep its policy steady.

Swiss retail sales increased 3.2% year-on-year, exceeding the 2.1% estimate, while the manufacturing PMI dropped to 55.3, missing the 56.3 forecast.

The North American calendar features jobless claims and manufacturing data.

Challenger job cuts declined 19.9% year-on-year, versus a 38.5% drop in the prior period. Although the decline has narrowed, announced cuts are still lower than a year ago.

• 8:30 a.m. ET — Initial jobless claims: 201,000 expected, 197,000 prior.

• 8:30 a.m. — Continuing claims: 1.730 million expected, 1.719 million prior.

• 9:45 a.m. — Final S&P Global manufacturing PMI.

• 10:00 a.m. — ISM manufacturing PMI: 54.8 expected, 54.6 prior.

• 10:00 a.m. — ISM prices paid: 72.9 expected, 71.1 prior.

• 10:00 a.m. — Construction spending: unchanged expected, down 0.5% prior.

The ISM report warrants scrutiny beyond the top-line figure. New orders offer insight into demand, employment provides context before Friday's jobs report, and prices paid help traders gauge whether manufacturing cost pressures are easing or intensifying.

The drop below 1.1300 for EURUSD creates an immediate decision point. Remaining below keeps pressure on the pair. A move back above and holding would cast doubt on the break's durability. A break alone is not enough; sellers need sustained trading below the level.