Forex week in review 40/2026: bond yields lift the dollar despite a weak jobs report

The last week of September and the first two days of October were a lesson in what moves a currency when the signals disagree. The US data were soft almost across the board: fewer job openings, inflation below forecast, a weaker factory survey and a payrolls number that was a third of what economists expected. On a normal week that combination knocks the dollar. This week the dollar index still gained almost 1%, because the thing that really mattered was the bond market, and bonds were selling off hard on both sides of the Atlantic.

All weekly figures below compare the Friday 2 October close with the Friday 25 September close, as reported by RTTNews. Gold figures are from CNBC and Reuters reporting on Friday afternoon.

The backdrop going into the week

To make sense of this week you need the bigger picture of 2026. According to CNBC, a US–Israeli war with Iran began in late February, and the energy shock that followed has pushed inflation back up across the developed world. That is why the ECB, which was cutting rates in 2025, and the Fed have both spent 2026 raising them again. The Federal Reserve raised its target range by a quarter point to 3.75–4.00% on 16 September. The European Central Bank lifted its deposit rate to 2.50% in September, its second increase of the year. The Reserve Bank of Australia had already hiked three times this year before this week.

Higher policy rates and higher energy prices have one more consequence: governments that borrow a lot have to pay more to do so, and bond investors start asking harder questions about public finances. France has been the focal point in Europe. That combination of inflation, rate hikes and fiscal worry is the context for everything that happened this week. If you want the underlying mechanics, our guide to central banks and interest rates explains why rate expectations move currencies.

Day by day

Monday 28 September

The week opened quietly, with EUR/USD printing its weekly high of 1.1392 on Monday and the dollar index making its weekly low near 100.98. It was the last calm moment of the week for the euro.

Tuesday 29 September

Two things happened. In Sydney, the RBA raised its cash rate target by 25 basis points to 4.60%, its fourth hike of 2026 according to the RBA's own rate history. In New York, the 30-year Treasury yield climbed to its highest level since 2002, briefly trading just above 5.6% according to CNBC. Separately, the US JOLTS report showed job openings in August falling to 7.08 million, below the 7.23 million forecast, according to RTTNews.

Wednesday 30 September

August PCE inflation, the Fed’s preferred gauge, held at 3.4% year on year when economists had expected a rise to 3.7%. Core PCE held at 3.0% against a 3.3% forecast, and both monthly readings undershot expectations, according to RTTNews. CNBC noted that the figures prompted some pullback in the dollar. Wednesday was also quarter-end, which matters more than many new traders realise: portfolio managers rebalance on the last day of the quarter, and those flows can push currencies around for reasons that have nothing to do with the news.

Thursday 1 October

This was the big day. US 10-year Treasury yields hit their highest level since 2002, and French government bond yields made another 14-year high, according to CNBC. The dollar index rose about 0.7% on the day and reached its highest level since April 2025. EUR/USD dropped below 1.1230 for the first time since May 2025 and made its weekly low of 1.1215. The September ISM manufacturing index slipped to 54.5 from 54.6, a touch below the 55 forecast, but nobody was paying much attention to factory surveys while the bond market was moving like this. CNBC also reported that US Treasury yields had just posted their largest quarterly rise since 1994.

Friday 2 October

The September jobs report was soft. The Bureau of Labor Statistics said nonfarm payrolls rose by 29,000, against a Reuters poll forecast of 90,000. The unemployment rate rose to 4.2%. Revisions took a combined 60,000 jobs off July and August, with August revised down to 133,000 from 162,000. Average hourly earnings rose just 0.1% on the month and 3.0% on the year.

In Europe, the flash estimate showed euro area inflation jumping to 3.8% in September from 3.2% in August, above the 3.6% forecast.

According to CNBC, the payrolls miss and the opposition of at least two senior Fed officials to an October hike pushed the CME FedWatch probability of an October rate rise down to about 22%, from around 70% earlier in the week. The dollar eased on Friday, but not enough to undo the week’s gains. The dollar index closed at 101.93.

Pair by pair

EUR/USD: down 1.2%, the dollar’s fourth straight weekly gain

The euro was the week’s clearest loser among the majors, falling from 1.1391 to 1.1254. The story was not really about the European Central Bank, which had raised rates only a few weeks earlier, and it was not about euro area inflation, which came in hotter than expected. It was about French public finances. When investors demand a higher yield to hold a country’s debt because they worry about the deficit, rather than because they expect the central bank to hike, that rise in yields tends to weaken the currency rather than support it. Higher yields driven by credit or fiscal fear are a warning sign; higher yields driven by expected rate hikes are usually supportive. Telling those two apart is one of the most useful skills in macro trading.

A 137-pip fall in a week is a large move for the most liquid pair in the world. If you want to translate that into money, our guide to what a pip is walks through pip values: on a standard lot of EUR/USD, one pip is worth about $10, so 137 pips is about $1,370 per standard lot. That is why position size matters more than direction for most retail traders.

GBP/USD: almost unchanged

Sterling finished at 1.3243 against 1.3253 a week earlier, a fall of less than 0.1%. It traded a 1.3180–1.3313 range. Against the euro the pound did well: CNBC put EUR/GBP at roughly 85.11 pence on Thursday, the euro’s weakest against the pound since late June. The pound was holding up because the UK was not the centre of the week’s fiscal stress, and because markets were starting to expect the Bank of England to raise rates later in the autumn.

USD/JPY: up 0.37%

USD/JPY rose from 157.28 to 157.86 and touched 158.46 at its high. The yen is the currency most sensitive to US yields, because Japanese rates remain much lower than US rates. When US 10-year yields climb to two-decade highs, the gap widens and the yen tends to weaken. RTTNews noted that stronger-than-expected Tokyo core inflation raised the odds of another Bank of Japan hike and limited the yen’s losses.

AUD/USD: down almost 1% despite a rate hike

The Australian dollar fell from 0.7024 to 0.6955 in a week in which its central bank raised rates. That surprises people who learned that higher rates mean a stronger currency. The rule only works at the margin: what moves a currency is the change in expected rates relative to other countries and relative to what was already priced. An RBA hike had been widely expected. Meanwhile US long-term yields were rising sharply and global risk appetite was soft as bonds sold off. The Aussie is a risk-sensitive currency, and on a week of falling bond prices and rising volatility it tends to struggle.

Gold: a second weekly loss

Spot gold was around $4,146 an ounce late on Friday, down about 3.3% on the week, according to CNBC and Reuters. A firm dollar and high Treasury yields weigh on gold because it pays no interest: when a safe government bond offers 5%, the opportunity cost of holding a metal that yields nothing goes up. CNBC noted that gold had fallen more than 20% since the war with Iran began in late February, which is the opposite of what many people expect from a so-called safe haven during a war.

Why the dollar rose on weak data

This is the question worth spending time on, because it comes up again and again. The US data this week were soft. Normally that would reduce expectations of Fed hikes and push the dollar down. And on the day, it did: the payrolls miss cut the October hike odds from about 70% to about 22%, and the dollar eased on Friday.

But the dollar’s weekly gain came from somewhere else. Long-term yields were rising globally because investors were worried about inflation, energy and government debt, and the US still offered higher yields than Europe or Japan. In a world where everyone’s bonds are selling off, money tends to flow to the largest, most liquid bond market with the highest yield, and that is the US. The euro had an extra problem in France. So the relative picture favoured the dollar even as the absolute US data softened.

The lesson for anyone using an economic calendar: a data surprise moves price for minutes or hours, but it competes with whatever larger story the market is already trading. Our guide on how economic data moves forex explains surprise versus consensus; this week shows the limits of that approach when the bond market is setting the agenda.

Volatility, gaps and your stop-loss

Weeks like this are where retail traders get hurt, and not always by picking the wrong direction. Thursday’s move in EUR/USD came in a straight line, with few pullbacks. If you were short and waiting for a bounce to add, you never got it. If you were long and had a stop below an obvious round number, you probably got filled at a worse price than you expected, because liquidity thins when everyone is selling at once. Our guide to slippage covers why a stop order becomes a market order once it is triggered, and why fills on fast days can be several pips worse than your stop level.

Stops also have to account for the size of moves the market is currently producing. A 20-pip stop on EUR/USD in a week with a 177-pip range is not a risk-management tool; it is a coin toss. The guide on where to put a stop-loss shows how to use average true range so your stop reflects current volatility rather than a fixed number. The corollary is that a wider stop needs a smaller position, which is covered in position sizing.

Leverage in a week of 1% moves

A 1.2% move in EUR/USD sounds small. On a leveraged CFD position it is not. Under ESMA rules, retail clients in the EU can use up to 30:1 leverage on major currency pairs, which means a margin requirement of about 3.33% of the position. A 1.2% move against a position using full 30:1 leverage would wipe out roughly 36% of the margin posted. Two weeks like this in a row and the account is in margin-call territory. That arithmetic is the main reason brokers disclose that most retail CFD accounts lose money, typically somewhere between 61% and 89% depending on the firm. See leverage and margin and margin call and stop-out for worked examples.

Example: a trader with a €5,000 account buys one standard lot of EUR/USD (€100,000) at 1.1391 at 30:1, posting about €3,333 of margin. If the pair falls to 1.1254 by Friday, the loss is 137 pips, roughly $1,370, or about €1,200 at those exchange rates. That is close to a quarter of the whole account in one week, from a move in the most liquid currency pair in the world. The same trade with one mini lot (0.10) would have lost about a tenth of that. The numbers are illustrative, but the proportions are real.

What this week teaches

• Bond yields can outweigh economic data. When long-term yields are moving on fiscal and inflation fears, a soft data print may barely dent the dollar.
• Not all rising yields are equal. Yields rising because a central bank is expected to hike tend to support a currency. Yields rising because investors fear a government’s finances, as with France this week, can weaken it.
• A rate hike that is already priced in does not automatically lift a currency. The RBA hiked and the Aussie fell almost 1%.
• Safe havens are not guaranteed. Gold fell during a war because higher real yields and a strong dollar mattered more than fear.
• Quarter-end and month-end flows can add noise to price action. Wednesday was both.
• Size positions for the volatility the market is actually producing, not the volatility you hope for.

Scheduled next week

These are the scheduled events for Monday 5 to Friday 9 October. Times and dates are as published by the relevant institutions; this is a list of events, not a view on how markets will react.

• Wednesday 7 October: minutes of the Federal Reserve’s 15–16 September FOMC meeting, the meeting at which the Fed raised rates to 3.75–4.00%.
• Wednesday 7 October: US Treasury auction of $39 billion of 10-year notes, part of a week that also includes 3-year notes on Tuesday and 30-year bonds on Thursday.
• During the week: the ECB publishes its account of the September monetary policy meeting.
• Thursday 8 October: US weekly initial jobless claims.
• Throughout the week: speeches by Federal Reserve officials, and continued focus on the French budget process.

Sources

• RTTNews: Dollar surged last week amid yield spike eclipsing weak data
• US Bureau of Labor Statistics: The Employment Situation, September 2026
• CNBC: Dollar hits 17-month high versus euro as bond selloff lifts yields
• CNBC: Gold heads for weekly drop as strong dollar, elevated Treasury yields weigh
• Reserve Bank of Australia: cash rate target history
• Federal Reserve: FOMC statement, 16 September 2026
• European Central Bank: key ECB interest rates
• Forex Fundamentals: euro area HICP, September 2026 release
• CNBC: 10-year Treasury yield hits highest level since 2002 as traders brace for key bond sale