Payrolls took October off the Fed's table, and yields rose anyway

Last week's note closed on a line: 159.02 on USD/JPY. A move above it with no intervention from Tokyo would say the warnings had stopped working. The pair never got there. On our feed it peaked at 158.45 on Thursday and closed the week at 157.84, and no intervention was reported. The line held.

The bigger story ran through the bond market. The US ten-year yield climbed to its highest since 2002 by Thursday, the euro fell below 1.13 for the first time since May 2025, and on Friday a payrolls report of just 29,000 finished off bets on an October hike by the Federal Reserve that had already fallen to about 28%. Yields dipped on the news and then finished the day higher, and the Dollar Index came back off its lows. That reversal is the part of this week worth keeping.

Four days of yields, one day of data

On Monday President Trump's rejection of Iran's plan to reopen the Strait of Hormuz sent oil higher, and the ten-year yield went back to the 2007 highs it had first reached the week before. Oil gave the rise back by the US afternoon. Yields did not.

The data that followed was mixed, and the bond market did not wait for it to agree. On Tuesday the Conference Board's consumer confidence index fell to 81.9 against 89.2 expected, and the dollar rose anyway. On Wednesday core personal consumption expenditures (PCE) prices rose 0.2% on the month, below the 0.3% forecast. Traders trimmed their October bets and the euro lifted briefly, but by the close yields and the dollar were higher again.

Thursday was the peak. Action Forex had the ten-year at around 5.34%, above the 5.228% high our last note recorded. By investingLive's count, the 5.33% it reached that day was the highest since 2002, past the 2007 peak the yield had revisited on Monday. The Dollar Index set a new high for the year.

Payrolls took October off the table, not the hikes

Friday's nonfarm payrolls rose by 29,000 in September against a 90,000 consensus, earlier months were revised down by 60,000, and the unemployment rate rose to 4.2%. The odds of an October hike had already slipped: Action Forex put them at 77.5% on 24 September, and by Friday morning, before the data, investingLive had them at about 28%. After the report, Action Forex's weekly review puts the probability of an October pause at 77.9%.

The first reaction did not last. Yields fell after the release and reversed higher later in the session, and Action Forex says markets judged the data was not enough to settle the bigger inflation risk. The same weekly review has the ten-year ending Friday around 5.28%, up on the day, and the Dollar Index finishing around 101.92 after its initial drop.

Its reading is the one to keep: markets took October off the Fed's table, not rate hikes. In the pricing it cites, the most likely outcome for December is still one more 25 basis point increase, to 4.00–4.25%, at 67.3%. The same review quotes Chicago Fed President Goolsbee saying both a pause and another hike remain possible, and that inflation, not the labour market, is still the central problem.

The euro fell on its hottest inflation

The euro lost more against the dollar than any other major this week, and it was not for lack of inflation. Spain's September figure came in at 4.9% on Tuesday, Italy's at 4.2% and Germany's at 3.3% on Wednesday, and on Friday the eurozone's flash estimate jumped to 3.8%, above forecasts of 3.6% to 3.7%.

The currency fell anyway. ING said Monday's comments from Christine Lagarde, president of the European Central Bank, had tempered expectations of an October hike, and Investing.com tied Thursday's drop to France's budget. EUR/USD fell for four straight days, broke below 1.13 for the first time since May 2025 and touched 1.1215 on our feed on Thursday afternoon, a 17-month low by Action Forex's count. Friday's close at 1.1252 ended the streak, and against the pound the euro finished the week near a two-and-a-half-month low, just under 0.8500 on our feed.

The barrel, the metals and the Aussie

Oil swung without steering the week. WTI crude jumped on Monday's Hormuz headlines and gave it back the same day, Brent slid to its lowest in about a week on Tuesday, and Thursday brought a rally that Friday largely undid. Brent dipped below $100 on Friday, and Action Forex's weekly review has it back around $102 into the weekend.

Gold had its worst day of the week on Monday, down 3.9% on our feed to $4,123, and then could not stay above $4,200. The $4,200 area turned it back on Wednesday, Thursday and Friday; the last attempt came on the payrolls release, a spike to $4,226 that closed the day at $4,148. Silver lost nearly 6% on the week.

The Reserve Bank of Australia raised rates by 25 basis points to 4.60% on Tuesday, and the Australian dollar fell that day and in the two sessions after it. Governor Bullock said the board had considered holding, and TD Securities expects no further hikes this year.

The week in our price feed

Last one-minute price before the Friday close in our own MT5 feed; changes are computed from unrounded prices. The dollar finished higher against all seven for a second week running, but against the pound and the Swiss franc only by a few pips. The largest moves were against the euro and the Australian dollar. Gold lost 3.34% on the week, from $4,291 to $4,148.

USD/CHF and USD/JPY both hid a round trip. USD/CHF rose for six straight sessions and hit a 16-month high of 0.8383 on Thursday morning, then handed back almost the whole week's gain. USD/JPY dipped to 156.38 in Wednesday's Asian trading, rose to 158.45 on Thursday and slipped back on Friday, when Tokyo's core inflation came in at 2.7% against 2.4% expected.

What our own gauges saw

Market Readiness Score (MRS) and Forex Strength Index (FSI) readings at each session's close. *Monday's share is of 1,182 minutes: our feed picked the session up at 01:16 UTC. The FSI spent four sessions in Greed and dipped to Neutral on Thursday, when its news and volatility components fell. We leave our carry gauge, the CTS, out of the table this week: its scale was recalibrated on Friday, so its readings before and after cannot be compared.

All five sessions had a leader clear enough to name, four different currencies with the yen twice. Over the 6,942 minutes our feed covered this week, the yen spent the most of them at the top of our strength table, 1,169, and the euro was second on 1,074, in the week it lost 1.22% against the dollar. As last week's note explained, the table counts minutes in first place, not how far a currency moves. The dollar was sixth of eight on that count, but in the top half on Tuesday and Thursday, against once the week before.

What stays open

Action Forex calls September's consumer price index (CPI) and producer price index (PPI) the next decisive tests for the Fed, more than any further labour-market commentary. Next week's calendar is lighter: investingLive's preview puts the Institute for Supply Management's (ISM) services survey on Monday, forecast at 55.1 from 55.4, the minutes of the Fed's September meeting on Wednesday and Canada's jobs report on Friday at the top of it. It notes that the minutes describe a meeting held before Friday's payrolls. Wells Fargo has ISM services slipping to 54.5.

Two things carry over from this week. Gold has been turned back near $4,200 three days running. On EUR/USD, Action Forex keeps its bias to the downside, towards 1.1185, while Bank of America, according to Investing.com, sees the pair at 1.15 by the end of the year.

The tell to watch. 1.1215 on EUR/USD, Thursday's low on our feed. With October off the Fed's table, the rate story that helped push the euro down has lost its nearest date. If EUR/USD closes a session below Thursday's low anyway, the euro's slide is running on yields, energy and France rather than on the Fed's calendar. If it closes every session above it, Friday's rebound was more than a pause.