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Dollar steady before Fed decision as markets eye UK budget

The dollar held near a two-week high ahead of the Fed decision, sterling awaited the UK budget, and New Zealand's central bank kept rates on hold, per Reuters.

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what happened

According to Reuters, the US dollar held its gains after reaching a two-week high ahead of the Federal Reserve's rate decision. Traders broadly expect the Fed to keep rates unchanged, but CME Group's FedWatch tool shows a 78% chance that it lifts rates by at least 25 basis points in December.

The dollar index, which tracks the greenback against a basket of six currencies, traded at 102.37. The yield on the US 10-year Treasury note rose 1 basis point to 5.0%. The euro was flat at $1.1126, just above its May 2025 low, while the dollar eased slightly against the yen to 157.89.

Investors are focused on the first budget of the Andy Burnham government, which finance minister John Healey is due to present at 1230 GMT. The pound slipped 0.1% to $1.328. The Canadian dollar inched up 0.1% to C$1.403 per US dollar ahead of an expected rate hike by the Bank of Canada. The New Zealand dollar fell 1.3% to $0.5609 after the Reserve Bank of New Zealand held its rate at 2.75%, surprising most economists who had expected a hike. Bitcoin rose 0.7% to $81,292.46.

why it matters

Strong dollar, high US Treasury yields and bets on tighter Fed policy add pressure on currencies and bond markets. The UK budget will determine how well sterling holds up: heavy reliance on borrowing could trigger a selloff in the currency and gilts, as during the 2022 mini-budget. This week's decisions from the Bank of Canada, the ECB and the Bank of Japan set the broader tone for currency markets.

market impact

Dollar, euro, pound and New Zealand dollar: Fed rate expectations and central bank decisions drive FX moves

  • US dollar pressure up — expectations of a possible Fed rate hike support demand for the currency
  • EUR/USD pressure down — the euro sits near its May 2025 low under dollar strength
  • Pound sterling mixed — the budget could support sterling or spark a selloff if borrowing is heavy
  • New Zealand dollar pressure down — the central bank's hold surprised economists who expected a hike

tags

CurrencyBondTreasury Notes

instruments

EUR/USDDXYUS 10-year TreasuryGBP/USDNZD/USDBitcoin

sources

  1. Dollar steady ahead of Fed decision; focus on UK budget — Reuters, 28 October 2026 at 10:35 UTC
  2. Dollar steady ahead of Fed decision; focus on UK budget — Reuters, 28 October 2026 at 12:13 UTC

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