Waller: More Hikes, US Yield at 24-Year High
Fed's Waller sees more rate hikes, US yields climb to 5.366 percent. What it means for EUR/USD at 1.1181.
Key Takeaways
- Fed Governor Waller sees more rate hikes ahead but gives no timetable.
- US 10-year and 30-year yields hit their highest levels since 2002.
- EUR/USD trades at 1.1181, and momentum points down on every timeframe.
Anyone trading the euro against the dollar is watching two numbers right now: a 5.366 percent yield on 10-year US Treasuries and a roughly 20 percent chance of a Fed hike in October. Both support the US currency, while rising French borrowing costs weigh on the euro area.
The dollar benefits from a Fed without a roadmap
Currency markets are asking how fast the Fed will keep tightening. According to investingLive, Governor Christopher Waller said in Istanbul that further steps are likely but need not come at every meeting. A pause on October 27 and 28 is therefore realistic, and markets have priced exactly that in: the reaction was calm.
Over the medium term, traders see at least three more hikes by the end of 2027, according to investingLive. The target range would then be 4.50 to 4.75 percent. Waller justifies his stance with inflation that has been above 2 percent for about five and a half years, the energy shock from the Iran conflict and AI-driven investment demand. He calls the US labor market solid despite a weaker September. The next consumer price data arrive next week.
Why the bond market sets the pace
The real momentum is in yields. Finanzmarktwelt reports 5.366 percent on 10-year and 5.725 percent on 30-year paper on Wednesday, both highs since 2002. Editor Claudio Kummerfeld points to tariffs, the Iran war, competition from AI companies as bond issuers and government debt as drivers.
Wall Street disagrees. Stefan Jäger summarizes a Bloomberg survey at Finanzmarktwelt: six large banks expect lower yields by December, ranging from 4.75 percent at Goldman Sachs to 5.05 percent at JPMorgan. Barclays strategist Anshul Pradhan sees no trigger that would push yields below 5 percent while the US economy stays resilient. Barclays considers 6 percent possible for the 30-year yield.
On the other side of the Atlantic, France darkens the picture. At Finanzmarktwelt, Markus Fugmann describes rising French yields and points to the highest debt ratio in the euro area. For the euro, that is an additional discount that works independently of the Fed.
What momentum says
Momentum signals a bearish picture for EUR/USD on all four timeframes: 1 hour, 4 hours, daily and weekly. At the time of capture the price was 1.1181. Short- and long-term signals agree. This describes the current state and is not trading advice.
Scenarios
If the 10-year US yield stays above 5.3 percent and the price report surprises to the upside, the probability of an October hike would likely rise above the current roughly 20 percent. EUR/USD would remain under pressure.
If inflation comes in softer and bond prices recover, as the banks expect by year-end, the dollar's yield advantage loses weight. From 1.1181, a euro rebound would be conceivable.
A third factor remains France: if yields there keep climbing, the euro suffers even without new signals from Washington.