Investing.com — The U.S. dollar jumped on Thursday to hit a nearly one-and-a-half-year peak, as inflationary concerns rose on economic data that showed U.S. manufacturers struggling with rising raw material costs. A slide in the euro after the unveiling of France’s budget also boosted the greenback.
The U.S. dollar index, which tracks the world’s premier currency against a basket of six major peers, climbed 0.6% to 102.03, its highest since April 9, 2025.
ISM data, bond rally in focus
A day after currency market participants received a softer-than-expected inflation report, the mood was again clouded following the Institute for Supply Management’s (ISM) latest report on the U.S. manufacturing sector. The prices index – which tracks changes in raw material and input prices paid by manufacturers – rose to 77.9 in September from 71.1 in August, coming close to its 78.3 level in March at the beginning of the U.S.-Iran conflict.
Conversely, ISM’s overall gauge of economic activity in the U.S. manufacturing sector expanded in September for a ninth consecutive month.
Despite the data, the U.S. Treasury bond market finally took a breather on Thursday, halting a steep selloff that had taken longer-term instruments to over 20-year highs. The benchmark 10-year yield fell 6.5 basis points to end at 5.246%, while the 30-year yield slipped 2.3 basis points to settle at 5.616%.
The focus now turns to Friday’s nonfarm payrolls report for further cues on the Federal Reserve’s future interest rate actions. Indicators from Wednesday suggested stronger U.S. economic growth, a resilient labor market, and cooling inflation, leading to a sharp reduction in October Fed rate hike bets.
French budget targets public deficit of 5% of GDP in 2027
Over in Europe, the focus was on France’s budget bill for 2027. The text was presented on Thursday, highlighted by a public deficit target of 5% of gross domestic product (GDP).
The country has been burdened with severe fiscal issues, with its deficit projected to reach 5.4% of GDP this year and public debt approaching 120% of GDP. French OATs have surged, with benchmark 10-year borrowing costs hitting their highest level since July 2002, and the sovereign spread between them and German Bunds have widened.
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“In total: 54 billion euros ($60.71 billion) in effort to bring the deficit down to 4.8%. Adding the new effort for our defense, the deficit will be brought to 5%,” French Prime Minister Sébastien Lecornu said on social media.
