The US Dollar (USD) has received robust support across multiple asset classes, driven by persistent inflation concerns and hawkish signals from Federal Reserve (Fed) officials. The Australian Dollar (AUD/USD) remains subdued for the fifth consecutive day, trading around 0.6930 during Asian hours on Friday, as elevated energy costs and expectations of higher US interest rates weigh on the pair [1]. Similarly, the Euro (EUR/USD) has weakened to around 1.1235, pressured by fiscal concerns in France and anticipation of the US September jobs report [2]. French 10-year government bond yields retreated after reaching their highest level since 2002, following the unveiling of France’s 2027 budget and deepening fiscal worries [2]. Rising oil prices, fueled by fears of a prolonged US-Iran conflict, have further contributed to inflationary pressures and higher yields [2][3].
Fed officials have reinforced a hawkish outlook. Dallas Fed President Lorie Logan stated that short-term borrowing costs need to rise by at least 50 basis points to make monetary policy 'modestly restrictive' and achieve the Fed’s 2% inflation target [2][3]. Logan’s remarks were scored highly hawkish, with a FXS Speechtracker score of 9.2/10 and the FXS Fed Sentiment Index rising by 1.68 points to 136.59, signaling increased expectations for further policy tightening [3]. Fed’s Cook also flagged artificial intelligence (AI) as a potential inflation risk for 2027, noting 'pockets of inflation' and the need to keep inflation expectations anchored, reinforcing a cautious, mildly hawkish bias for the Dollar [3].
Market expectations reflect these hawkish signals, with nearly a 24.9% probability of a Fed rate hike in October and a 79.4% chance of an increase in December, according to the CME FedWatch Tool [2]. Economists project US Nonfarm Payrolls to add 90,000 jobs in September, a slowdown from the previous month’s 162,000, while the Unemployment Rate is expected to remain unchanged at 4.1% [1][2]. Analysts at Rabobank attribute the USD’s strong performance to the shift from expectations of Fed easing to tightening, noting the Euro’s inability to capitalize on ECB hawkishness amid growth risks and energy import concerns [2].
Silver (XAG/USD) has also come under pressure, slipping below $60.50 to trade around $60.30 per troy ounce, as rising crude oil costs and a strengthening Dollar drive selling pressure [3]. Reports of attacks on tankers in the Strait of Hormuz and strikes on refineries by Iran and its Houthi allies have heightened geopolitical tensions, with the US considering deploying another aircraft carrier to the Middle East [3]. Technical analysis for AUD/USD shows the pair extending its decline below both the nine- and 50-period EMAs, with the 14-day RSI in oversold territory near 25, suggesting stretched selling pressure but limited prospects for a trend-changing rebound [1].
In Australia, Commonwealth Bank CEO Matt Comyn stated that the Reserve Bank of Australia (RBA) has likely finished hiking rates for now, though the November meeting remains 'live' with another rise possible, depending on upcoming quarterly inflation data [1]. Commerzbank’s Volkmar Baur believes the RBA will stay patient, citing lagged effects of previous hikes and weakness in the real estate sector, leaving the AUD without significant support from near-term rate increases [1].
CONCLUSION
Persistent inflation concerns and hawkish Fed signals have strengthened the US Dollar, pressuring the Australian Dollar, Euro, and Silver. Market participants are closely watching the upcoming US jobs report and central bank actions for further direction. Elevated energy costs and geopolitical tensions continue to fuel inflation risks, reinforcing expectations for tighter US monetary policy and sustained Dollar strength.