The US Dollar (USD) has strengthened across major currency pairs, including the Canadian Dollar (CAD), Swiss Franc (CHF), and Australian Dollar (AUD), driven by rising global yields and heightened expectations of a Federal Reserve (Fed) rate hike. The USD/CAD pair reached fresh two-week highs above 1.3920, marking the second consecutive day of CAD depreciation amid risk aversion and anticipation of the Bank of Canada's (BoC) interest rate decision, which is widely expected to leave its benchmark rate unchanged at 2.25% for the rest of the year [1]. Meanwhile, the USD/CHF pair gained for the second day, trading around 0.8130, as the US 10-year Treasury yield surged to 4.80%, its highest since early 2025, and crude oil prices spiked due to escalating US-Iran tensions, fueling inflation concerns [2]. The CHF has underperformed, with Brown Brothers Harriman noting it is the worst performing G10 currency this quarter, attributed to Switzerland's low-yield environment and the Swiss National Bank's (SNB) steady hold at 0.00% [2].
US economic data released this week has been mixed: July JOLTS job openings fell below expectations at 7.27 million, and the ISM Manufacturing PMI eased from 55.6 to 54.6 in August, though it remains in expansion territory [2]. Despite these figures, Fed funds futures price in a 67% chance of a 25bps hike at the September 16 meeting and imply 60bps of tightening over the next twelve months, with the August CPI on September 11 seen as a decisive test [1]. Investors are also awaiting the ADP Employment report, expected to show a net increase of 47K in private payrolls for August [1][2].
In Australia, the AUD/USD pair dropped to a one-and-a-half-week low around 0.7135, despite a better-than-expected Q2 GDP print of 0.4% (consensus 0.3%, previous 0.3%) [3]. The initial positive reaction faded quickly as US Dollar strength, bolstered by Fed rate hike bets and US-Iran tensions, weighed on the AUD. Technical analysis suggests support near the 0.7125 confluence, with further downside possible if this level is breached. The short-term bullish tone for AUD/USD remains intact as long as it stays above this support [3].
Switzerland's SVME PMI rebounded sharply to 57.1 in August from July's 53.2, its highest since May, and July Real Retail Sales accelerated 2.3% year-over-year, beating forecasts [2]. However, these positive domestic indicators have not offset the CHF's weakness against the USD, as the SNB's steady policy stance continues to weigh on the currency [2].
CONCLUSION
The US Dollar has rallied against major currencies, supported by rising yields and strong Fed rate hike expectations, despite mixed US economic data. The Canadian Dollar, Swiss Franc, and Australian Dollar all weakened, with market focus shifting to upcoming US employment reports and central bank decisions. The prevailing risk-off mood and anticipation of further Fed tightening suggest continued USD strength in the near term.