[MARKET ANALYSIS] USD firmer against all G10 currencies with yields rallying on continued energy upside

• Yields driving action across FX today with all major currencies weaker against the Buck (DXY +0.2%). Recent updates sparked a typical geopolitical risk-off reaction with DXY reaching a new 99.63 peak and looking to return to that 99.70 peak seen after Warsh on Friday. The driver was reports via Maritime Risk firm Marisks, which said two oil supertankers were hit by projectiles in the Strait of Hormuz. Despite the number of bullish USD factors today, downside risks could emerge again via renewed USD debasement fears, Treasury action to curtail yields, or a soft Payrolls print this Friday.
• Continued upside in energy benchmarks (TTF Oct’26 at EUR 71/MWh) continue to weigh on European currencies with all CEE, Euro and Sterling weaker against the Buck. No EUR move to this morning’s Final EZ Manufacturing PMIs, which saw the EZ majors confirmed in expansion. EUR/USD looking to return to the 1.1577 trough which it printed post-Warsh; should this breach, the 100DMA @1.1570 could be tested. For CEE, ING writes this morning that recent hawkish repricing should limit further weakening vs. EUR.
• Cable stopped just short of 1.3530, a zone which has proven support since mid-Aug; the pair also falling through the 21DMA for the third session in a row. All other significant DMAs are below, around the 1.3450 zone.UK yields are in focus with the 10yr at highs of 5.23%, well above the OBR’s March assumption of 4.5%. A former Treasury official notes that these moves, if applied across the curve, are a GBP 6bln increase in debt interest by 2029/30. Parliament is back from recess today with the PM’s Spokesperson scheduled at noon and Burnham himself after 15:30 BST, though no major policy announcements are expected.

This is the established energy-shock playbook: strikes on shipping in the Strait of Hormuz transmit through crude and European gas benchmarks into a rates and terms-of-trade move, and the pattern in past episodes has been a bid for the dollar as both safe haven and relative energy self-sufficiency trade, with the energy importers' currencies (EUR, GBP, CEE) bearing the brunt. The distinguishing feature here is that the channel is running through yields rather than pure risk aversion, which historically has been the stickier variant for the dollar; risk-off flows fade quickly when tanker incidents prove isolated, while an energy-driven rate repricing persists as long as benchmarks stay elevated. The gilt leg is its own case: a 10-year trading well above the fiscal watchdog's assumption revives the debt-sustainability framing that has periodically turned UK yield spikes from sterling-supportive to sterling-negative, the split hinging on whether higher yields read as growth or as fiscal risk. The immediate tells are whether the Hormuz incidents escalate to insurance and freight repricing or remain one-off, and whether the dollar bid survives a soft payrolls print, since data-driven reversals of geopolitically-driven dollar rallies have been the norm when the underlying event does not escalate. On the euro side, hawkish repricing of the central bank has historically cushioned but not reversed the currency in energy-led moves.