The US 10-year Treasury yield has pushed up to levels not seen since 2007 — just before the Global Financial Crisis broke. That's a genuinely uncomfortable historical marker to be revisiting, and yet the dollar's reaction has been almost contrarian: rather than extending gains, USD has actually peeled back off its multi-month highs against both the Pound and the Euro.
Don't mistake that pullback for weakness, though. Yields remain well above 5%, and the dollar is still sat firmly in deep bullish territory across the board. If anything, this looks less like the top of the move and more like a rally pausing for breath after running hard.
Sterling has been the standout underperformer through this, and I think we're starting to see contrarian positioning build against the current BoE rate outlook. Markets pricing the base rate at 5% this time next year strikes me as firmly overdone — that's a big ask from an economy already showing plenty of strain, and I'd expect that repricing to keep weighing on the Pound in the weeks ahead.
As for the dollar itself, there's little reason to expect it to give back much more ground near-term. US fiscal spending shows no sign of slowing, and yesterday's PMI data had US producers at their most confident since 2023. The trade is admittedly starting to look crowded — a lot of people are leaning the same way — but a crowded trade isn't the same as an exhausted one. This one still looks like it has legs.
No major economic releases on the calendar today, so expect price action to keep taking its cues from yields rather than fresh data.
Locking in today's rate could make sense before the next leg of this move plays out — speak to a Caxton dealer now for a live quote.