Dollar eases from highs as Trump rules out Iran strikes before midterms

The dollar slipped back from near its recent highs late Thursday after President Trump said the US would not attack Iran before the November 3 midterm elections. FXStreet reports that the 10-year Treasury yield ended near 5.22% after the comments, down from Wednesday's highest level since 2002, and that the yen gained.

The calm did not last long. Citing the New York Times, FXStreet reports that Trump has ordered plans drawn up for options of returning to fighting against Iran, including three days of strikes. Earlier on Thursday, investingLive relayed unverified Arab sources saying several severe explosions had hit the Strait of Hormuz.

What moved and why

Safe-haven demand shifted away from the greenback. According to FXStreet, flows moved from the US dollar to the Japanese yen and Swiss franc as Wall Street and US yields fell. The same report put AUD/USD at 0.6960, down 0.11% on the day, as an AI-led sell-off hit stocks.

The euro held firm into Friday's Asian session. FXStreet says EUR/USD traded near 1.1215, though fears over France's debt may cap gains. Investing.com reports that euro zone finance ministers told France to pass its 2027 budget to calm markets.

US bond supply went smoothly. The Treasury sold $22 billion of 30-year bonds at a high yield of 5.618%, with a bid-to-cover of 2.54 times, which investingLive graded a solid B.

The majors

The table shows ECB reference rates from the fixing of Thursday, October 8, against the October 7 fixing. Much of the late-session news above came after that point.

The peso was the biggest mover, with USD/MXN down 0.45%. Over five fixings, EUR/USD is still down 0.99%. Investing.com reports the Canadian dollar gained on an oil rally and a narrower yield gap. On the yuan, UOB strategists quoted by FXStreet expect USD/CNH to trade between 6.6950 and 6.7270 over one to three weeks.

Charts: EUR/USD and USD/JPY.

Central banks and data

• Bank of England: External member Greene said in Cape Town it is dangerous to assume markets will do the BoE's work for it, and that UK pay awards look set for about 3.5% next year, per FXStreet. She has voted for a hike at each of the last three meetings. Governor Bailey said policy needs an unwavering commitment to returning inflation to target, according to investingLive. For more on the pound's floor, see this explainer on GBP/USD support at 1.3200.
• Federal Reserve: FXStreet reports that Fed hike bets have shifted to December. Gold rose to around $4,140 in early Asia, rebounding from a two-month low, per FXStreet.
• US data: Weekly jobless claims came in at 197K against 200K expected, and August wholesale inventories rose 0.5% against 0.7% expected, according to investingLive. The Atlanta Fed GDPNow Q3 estimate slipped to 3.6% from 3.7%.
• Japan: Household spending fell for a ninth straight month, but by less than expected. investingLive says the mixed data is unlikely to shift Bank of Japan expectations decisively.

What to watch next

1. US Michigan consumer sentiment for October, due Friday, per FXStreet.
2. Iran headlines, after reports of new strike plans despite Trump's pledge of no attacks before November 3.
3. France's 2027 budget, as euro zone ministers press Paris to pass it.
4. Fed pricing for December, and the next GDPNow update in a week ahead of the first Q3 GDP release, per investingLive.