Dollar on track to snap four-week rally as AI debt worries weigh

The dollar kept slipping on Friday and is on course to snap a four-week rally, according to Investing.com. Worries about AI-related debt are the new driver, and they are now sharing the stage with a week of hot US inflation data.

Sterling is a beneficiary. Investing.com reports that the pound is set to end a seven-week losing run as the dollar slips on AI fears.

What moved and why

The bond rally that pulled the dollar lower on Thursday paused in Europe. Investing.com says US yields edged up after the rally as markets digested AI debt worries.

The investingLive European session wrap put the 10-year Treasury yield up 2.5 basis points at 5.11%. It said NZD led the majors on the day, while USD and JPY lagged. Stocks were steady.

The bigger question is what the bond market is pricing. In a market playbook note, investingLive pointed out that two hotter-than-expected US inflation readings in two days came with lower, not higher, Treasury yields. It asked whether the bond market is starting to worry more about US growth than inflation. The same publisher's European wrap also flagged that gold shrugged off the hot data as focus may be shifting to growth concerns.

Fixing reference

The latest ECB reference rates are from Thursday, 15 October, and were covered in our evening edition. EUR/USD fixed at 1.1208, up 0.12% from the 14 October fixing. GBP/USD fixed at 1.3247 and USD/JPY at 157.98. AUD/USD stood out with a 1.41% drop to 0.6911, a move our sister site unpacks in its explainer on the Aussie fixing and volatility. These are official fixings, not live quotes. Chart: DXY on TradingView.

Central banks and data in the news

• US import prices: September import prices rose 1.1% against 0.8% expected, investingLive reports. The prior reading was revised to 0.5%. Year on year, import prices hit 8.1% versus 7.0% before. Export prices jumped 2.2% against 1.0% expected. investingLive called it an ugly week for inflation data and said the market seems to think the Fed can wait until December.
• Eurozone CPI: Final September inflation was confirmed at 3.8% year on year, up from 3.2% in August, with core at 2.5%, according to investingLive. Energy was the main culprit.
• Fed: In the Asia-Pacific wrap, investingLive reports that Warsh stayed silent on rates, would not prejudge the rest of 2026 and named October and December as decision points.
• Bank of England: The same wrap says Governor Bailey sees UK second-round inflation effects as subdued so far, but too early to judge.
• New Zealand: Card spending fell for a second month and food prices held flat in September, investingLive reports. It said weak household spending offsets the stronger manufacturing survey.

Bank forecasts

BofA forecasts EUR/USD at 1.15 by year-end and 1.20 by end-2027, Investing.com reports. Investing.com also reports that Goldman Sachs sees the Korean won strengthening, while the Indonesian rupiah hit July lows on an MSCI threat. Chart: GBP/USD on TradingView.

What to watch next

1. The weekly close for the dollar. Investing.com has it on track to end a four-week rally, and sterling to end a seven-week losing run.
2. Treasury yields. investingLive's chart of the day says 10-year yields reversed this week but the real test is still ahead.
3. Fed decision points. Warsh named October and December, per investingLive.
4. The ECB meeting. investingLive's daily events preview says the ECB is expected to keep rates steady at the upcoming meeting, citing a lack of clear second-round effects and recent bond market woes.