The dollar index (DXY) reached a 1.75-month high on Wednesday, finishing up 0.53%, influenced by the 10-year T-note yield hitting a 19-year high of 5.13%. This rise was supported by the OECD’s increased 2026 US GDP forecast to 2.2%, alongside a reduction in inflation expectations to 3.6%. Speculation that the Federal Reserve may continue tightening monetary policy was bolstered by Fed Governor Michael Barr’s comments on the need for further policy adjustments.
During the week ending September 18, US mortgage applications fell by 1.5%, with the average 30-year fixed-rate mortgage climbing to a 2.25-year high of 7.12%. Concurrently, the US S&P manufacturing PMI unexpectedly rose to 57.0, the strongest pace in over four years. Market analysts assign a 69% chance of a 25 basis point rate hike at the next FOMC meeting scheduled for October 27-28.
In the Eurozone, the S&P manufacturing PMI remained steady at 52.7, above expectations, while the composite PMI rose to 53.1, the fastest expansion in 3.25 years. The OECD also revised its 2026 Eurozone GDP forecast to 1.0% and inflation estimate to 3.0%. Markets anticipate a 60% possibility of a 25 basis point rate hike at the ECB’s meeting on October 29.
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