Rising US bond yields and hawkish Fed rate hike bets weigh on risk sentiment, lifting the USD and pressuring the Australian Dollar.
The Australian Dollar (AUD) trades slightly higher at 0.6976 against the US Dollar (USD) in European trading but remains under pressure. Surging US Treasury yields, now at 4.70% for the 10-year note—the highest in over 18 months—have dampened risk appetite amid revived Federal Reserve rate hike expectations.
The CME FedWatch tool shows a 33.7% chance of a Fed rate hike next week, up sharply from 11.8% last week. A month ago, odds were similar but eased after softer US CPI data. Meanwhile, the US Dollar Index (DXY) holds near a three-week high at 101.50, supported by higher yields and geopolitical risks boosting inflation concerns.
S&P 500 futures hover near Thursday’s low of 7,404, reflecting a risk-off mood. Oil price spikes, driven by supply disruption fears in key global chokepoints, have further fueled inflation projections, reinforcing expectations for tighter monetary policy.