The dollar has stepped back from its 18-month high — but ING's Chris Turner argues that is consolidation, not a reversal. In a Friday note, he points to a near-20-basis-point flattening of the US 2s10s Treasury curve this week as the greenback's new anchor: scorching inflation data is pinning short-dated rates near their peaks while the long end has rallied on safe-haven demand. The result, he says, is the dollar holding just beneath its recent top rather than breaking down. His condition for a genuine turn is specific: short-end rates actually breaking lower. "We are not there yet."
Consider the collision this week produced. US consumer inflation printed 3.7% year-on-year on Wednesday, and producer inflation followed at 6.3% on Thursday — the fastest wholesale pace since December 2022, more than double the 0.6% consensus. Yet the 10-year Treasury yield sank to 5.04% on Thursday, its lowest since September 23.
Why it matters
This is the classic configuration in which the dollar tends to outperform activity-linked and emerging-market currencies: policy is still tightening while growth forecasts get trimmed. That is Turner's framework, and this week fit it almost too neatly. AI-buildout credit fears — centered on names like CoreWeave — sent tech into a tailspin: the Nasdaq 100 has shed 3% since Monday, and South Korea's KOSPI plunged 7.6% on Thursday, tripping circuit breakers as chip stocks collapsed more than 9%. Money fleeing equities piled into long-dated Treasuries — Bloomberg's Friday wrap put the 10-year on track for its biggest weekly decline since February — which flattened the curve without touching the inflation bid under short rates. The contrast with Tuesday's read is instructive: ING then flagged the dollar as 1.1% overvalued across the G10, but this week the mechanics changed. The retreat has been orderly — the dollar index logged its biggest single-day drop in over a month on Thursday, just 0.3% — and against the yen, which our USD/JPY analysis tracks daily, the greenback never really blinked.
What to watch
- Fed Chair Warsh speaks at the IMF/World Bank meetings in Bangkok tonight — the last chance to guide expectations before the pre-meeting blackout starts Saturday. With inflation running hot, traders will parse every word.
- US import prices print today; ING expects near 8% year-on-year, which would be the hottest reading since summer 2022.
- The 2-year Treasury yield at 4.76% is ING's line in the sand — a sustained break below it, not the 10-year's rally, is what would signal a dollar turn.
- Asian tech spillover: whether the KOSPI circuit-breaker rout bleeds into a second day decides if safe-haven Treasury buying extends and the curve flattens further.
MarketRadar take
Our read of the tape agrees with Turner's framing, with one caveat: the retreat is concentrated against Europe, not Asia. MarketRadar's snapshot at 11:39 UTC showed EUR/USD at 1.1260 and GBP/USD at 1.3340 — both above their pre-NFP reference points — while USD/JPY held at 158.03, 0.31% above its pre-payrolls mark. That is the flat-curve effect in miniature: the dollar is firm where carry and tightening bets dominate (yen) and softer where rate differentials have narrowed (euro, pound). Until the 2-year breaks — the trigger ING itself laid out — fading this consolidation means fighting both the curve and the Fed.
| Pair | 11:39 UTC level | Pre-NFP reference | Net move | What it shows |
|---|---|---|---|---|
| EUR/USD | 1.1260 | 1.1241 | +0.17% | Euro has clawed back some ground |
| GBP/USD | 1.3340 | 1.3200 | +1.06% | Pound leading the majors' rebound |
| USD/JPY | 158.03 | 157.54 | +0.31% | Dollar still pushing on the yen |
