The US Dollar extended its rally against major currencies, driven by a sharp rise in US Treasury yields and hawkish signals from Federal Reserve officials. The British Pound (GBP/USD) fell for the fourth consecutive trading day, down 0.21% to 1.3213 after reaching a daily high of 1.3256, as investors responded to robust US labor market data and expectations of further Fed tightening [1]. Similarly, the New Zealand Dollar (NZD/USD) traded around 0.5655, down 0.30% on the day, pressured by the strong US Dollar and elevated US yields, with the 10-year Treasury yield climbing to 5.162%, its highest since 2007 [1][2].
US Initial Jobless Claims for the week ending September 19 came in at 197K, below both the previous week's 198K and forecasts of 201K, reinforcing the view of a resilient US labor market [1][2]. The S&P Global Composite PMI also surprised to the upside, reaching 58.4 in September, its highest in five years, further supporting the case for continued Fed tightening [2]. The US Dollar Index (DXY) rose 0.19% to 101.30, reflecting broad-based strength [1].
Federal Reserve officials maintained a hawkish tone, with New York Fed's John Williams and Philadelphia Fed's Anna Paulson both suggesting that more rate hikes may be needed to control inflation [1][2]. Cleveland Fed's Beth Hammack also warned of persistent inflation pressures [1]. Market expectations for another Fed rate hike in October increased, with the CME FedWatch tool showing a 68% probability, up from 55% a week earlier [2].
In the UK, business activity cooled in September while inflationary pressures persisted, putting pressure on the Bank of England (BoE), which kept rates unchanged at its September meeting. However, Governor Bailey indicated that further rate increases remain possible [1]. For New Zealand, the NZD found some support as markets priced in an 87% chance of a third Reserve Bank of New Zealand (RBNZ) rate hike in October, up sharply from 20% earlier in the month, following comments from RBNZ Governor Anna Breman about the risk of higher inflation due to rising oil prices [2].
Technical analysis for both GBP/USD and NZD/USD showed bearish momentum, with both pairs trading below key moving averages and their respective Relative Strength Index (RSI) readings in oversold territory, suggesting stretched downside but no immediate sign of recovery [1][2].
CONCLUSION
Surging US Treasury yields and hawkish Fed commentary have fueled a broad US Dollar rally, pressuring both the British Pound and New Zealand Dollar. While the Pound faces additional headwinds from cooling UK business activity, the Kiwi is cushioned by rising expectations of further RBNZ tightening. Market sentiment remains negative for both currencies as the US economic outlook strengthens and rate hike bets intensify.