G10 FX Shifts After Fed Rate Hike as US Dollar Index Climbs Above 100

The Federal Reserve (Fed) raised its target range by 0.25 percentage points to 3.75% to 4.00% on Wednesday, marking its first rate increase since 2023. The decision was unanimous, while updated projections indicated that most policymakers expect at least one further increase this year. The Dollar Index (DXY) subsequently climbed above 100, trading around 100.30 and reaching its highest level in several weeks.

US economic data also added to the policy backdrop. Retail Sales rose 1.2% in August, while the core measure increased 1.4%, consistent with resilient consumer spending. Short-term Treasury yields moved higher after the Fed decision, while the 10-year yield traded around 5.0%, after reaching 5.041% earlier in the week.

Attention now turns to the Bank of England (BoE), which is expected to leave Bank Rate unchanged at 3.75% today. GBP/USD has moved below 1.3400, while EUR/USD has fallen below 1.1500, with both pairs moving lower as the US dollar strengthened following the Fed decision.

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GBP: Sterling Falls Below 1.3400 After Fed Rate Hike

GBP/USD: 1.3387 | EUR/GBP: 0.8571

GBP/USD is trading around 1.3390 after moving below 1.3400 following Wednesday’s Fed rate increase. The pair is near levels last seen in late July, while the Dollar Index has moved above 100 as markets reassess expectations for further US rate increases.

Attention now shifts to today’s Bank of England (BoE) decision. Market pricing continues to favour Bank Rate remaining unchanged at 3.75%, with investors assigning a greater probability to a possible increase later in the year than to a move today.

The vote split and accompanying communication could influence market expectations for the path of Bank Rate over the coming months. Wednesday’s inflation data showed headline CPI at 3.1%, while core inflation remained at 2.6%. Policymakers are also assessing higher energy costs alongside slower wage growth and softer labour-market indicators.

EUR/GBP is trading around 0.8570, slightly above the levels seen earlier this week. The cross could be sensitive to whether today’s BoE communication changes expectations for UK rates relative to the European Central Bank (ECB) rate path.

For sterling, the immediate focus is therefore on the BoE vote and guidance, particularly whether policymakers indicate that a rate increase later this year remains under consideration.

Key technical reference levels for GBP/USD: resistance sits near 1.3498, followed by 1.3565, while support sits around 1.3333, followed by 1.3274.

Key technical reference levels for EUR/GBP: resistance sits near 0.8595, followed by 0.8645, while support sits around 0.8554, followed by 0.8500.

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EUR: Euro Falls Below 1.1500 After Fed Rate Hike

EUR/USD: 1.1476

EUR/USD is trading around 1.1476 after falling below 1.1500 following Wednesday’s Fed decision. The pair moved to a multi-week low as the US dollar climbed above 100 and markets increased expectations that US interest rates could remain higher for longer.

Fresh Eurozone wage data provided a separate domestic development. Annual labour-cost growth slowed to 3.1% in the second quarter from 3.3% previously, while the ECB’s wage tracker points to only a modest increase in negotiated pay growth into early 2027. The figures may provide less evidence of renewed wage-driven inflation pressure at a time when policymakers are also assessing higher energy costs.

For EUR/USD, the recent move has coincided with a widening divergence in expectations for the next stages of US and Eurozone monetary policy. The Fed’s updated projections indicated scope for further US tightening, while the ECB continues to emphasise a data-dependent approach rather than committing to additional rate increases.

Today’s final Eurozone CPI reading may provide another update on inflation conditions, although the post-Fed move in the US dollar remains one factor influencing the pair.

Key technical reference levels for EUR/USD: Resistance sits near 1.1515, followed by 1.1565, while Support sits around 1.1450, followed by 1.1400.

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USD: Dollar Index Rises Above 100 as Fed Projections Point to Further Tightening

DXY: 100.30

The Dollar Index (DXY) is trading around 100.30, its highest level in roughly seven weeks, after Wednesday’s Fed decision and updated projections shifted expectations for the path of US interest rates. The index has now risen for six consecutive sessions and moved back above the 100 level.

The Fed’s September projections showed 16 of 18 policymakers anticipating at least one further 25-basis-point increase by the end of 2026. The Fed also raised its inflation projections, with Chair Kevin Warsh emphasising persistent inflation risks while avoiding firm forward guidance on subsequent meetings.

Shorter-term Treasury yields also moved higher after the decision, with the two-year yield reaching around 4.72% as markets reassessed the prospect of additional tightening. That shift in rate expectations coincided with further gains in the US dollar across several major pairs.

Today’s US calendar includes Initial Jobless Claims, alongside housing and regional manufacturing data. These releases may influence expectations around the pace of future Fed tightening, although the updated projections and subsequent Fed communication may remain important influences on the near-term USD outlook.

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Other Currencies: Yen Weakens as Markets Turn to BoJ After Fed Rate Hike

AUD/USD: 0.7116 | NZD/USD: 0.5735 | USD/JPY: 155.67 | GBP/JPY: 208.55

USD/JPY is trading around 155.67 after the yen weakened following Wednesday’s Fed rate increase. The move coincided with higher short-term US yields and a broader rise in the US dollar, while attention now turns to Friday’s Bank of Japan (BoJ) policy decision.

A BoJ rate increase is widely expected on Friday, with investors also assessing any guidance from Governor Kazuo Ueda on the possible pace of further increases. The yen could therefore remain sensitive to changes in expectations for the relative US and Japanese rate paths.

NZD/USD is trading near 0.5735 after New Zealand’s economy expanded 0.2% in the second quarter, above expectations for 0.1% growth. Annual GDP increased 2.6%, although the New Zealand dollar has continued to trade below recent levels following the Fed decision.

AUD/USD is holding around 0.7116 after the International Monetary Fund said Australia may require further interest-rate increases if inflation pressures persist. Market pricing continues to reflect expectations of additional Reserve Bank of Australia tightening, while broader US dollar moves remain an important influence on the pair.

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Current Rate Table

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Market Lookahead

Thu, Sep 17

• BoE Interest Rate Decision, Vote Split and Policy Statement
• US Initial Jobless Claims

Fri, Sep 18

• BoJ Interest Rate Decision and Press Conference
• UK Retail Sales (Aug)

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