At 15:57 GMT, DXY is trading 98.181, down 0.453 or -0.46%.
Fed Cut, Labor Weakness, and Yield Compression Drive Dollar Pressure
The dollar came under pressure after the Fed lowered its overnight rate to 3.5%–3.75%, a decision that featured three dissenting “no-cut” votes. That split encouraged traders to interpret the move as less supportive for future easing. Chair Powell emphasized that the Fed is prepared to wait for further evidence before adjusting policy again, and the projection of only one cut in 2026 reinforces a slower pace. For DXY, reduced yield support combined with uncertainty around the Fed’s path cuts into the index’s carry advantage.
Labor market concerns added to selling pressure. Jobless claims surged to 236,000, well above expectations, prompting traders to reassess the near-term economic backdrop. Weakening labor signals tend to weigh on the dollar by increasing the likelihood of further easing if conditions deteriorate.
FX Flows Favor EUR and GBP as Dollar Softness Dominates
Sterling held its recent gains versus the dollar as the softer U.S. backdrop overshadowed a quiet U.K. calendar. The pound traded near $1.2288, supported by the broader decline in the greenback. Expectations for a Bank of England rate cut next week have not prevented GBP from benefiting from dollar outflows.
Meanwhile, euro strength continued as markets considered the possibility of an ECB hike late next year, lifting EUR/GBP to 87.51 pence. Stronger cross-currency flows into the euro and stable GBP positioning both limited dollar demand.
Declining Treasury Yields Strip Support from the Dollar
Treasury yields slid on Thursday, with the 10-year at 4.118%, the 2-year at 3.515%, and the 30-year at 4.761%. Lower yields reduce relative returns on U.S. assets, pressuring the dollar as global investors rotate toward alternative markets. The combination of softer data and a cautious Fed message encouraged broader risk uptake, further weighing on defensive dollar flows.
