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cobcha posted an update
US Dollar Dominates as Bears Run for Cover, Yields Surge
US dollar surges as GDP and inflation revisions lift yields, forcing shorts to cover. DXY rebound, COT data, and key FX moves shape trader sentiment.
The final GDP release rarely moves markets, but Thursday’s Q2 US growth figures proved an exception — much to the delight of US dollar bulls. GDP was revised up to 3.8% y/y from 3.3%, its strongest pace since Q3 2023. Consumer spending rose to 2.5% from 1.6%, while sales were revised up to 7.5% from 6.8%. Inflation also ticked higher in Q2, with PCE prices revised to 2.1%, core PCE at 2.6%, and super-core at 2.4%.
This has traders questioning the Fed’s rate-cut path. Fed funds futures still price an 85% chance of a November cut, but that’s down from near-certainty earlier this week. The odds of a December cut have slipped to 60%, while expectations of further cuts into 2026 have faded. Yields pushed higher across the curve, with the 2-year rising 7.3bp to 3.6% (more than double its 1-year daily average move of 3.5bp). The 10-year climbed 9.3bp and the 30-year added 9.5bp.