Dollar Hits 19-Month High: Is EUR/USD Heading for 1.10?

A fresh wave of Fed rate-hike bets has sent the US dollar to a 19-month high. The euro is under pressure, sterling is losing ground, and the yen is approaching a level that could trigger Japanese intervention.

The dollar is back in the driving seat.

The US Dollar Index (DXY) climbed to 102.96, its highest level since April 2025, as hotter-than-expected US inflation and hawkish Fed comments pushed traders to reconsider the outlook for interest rates.

Markets are now pricing in an 88% chance of a 25-basis-point hike in December, while the possibility of a larger 50-basis-point increase has also entered the conversation.

That is a major shift in market expectations. Goldman Sachs now expects two more rate hikes, in December and March, adding to the dollar's appeal as higher US yields attract investors.

Three currency pairs worth watching

EUR/USD: Is 1.10 the next stop?

The euro has slipped below 1.11, with the dollar's strength adding to existing pressure from concerns over French debt and Europe's economic outlook.

Rabobank expects EUR/USD to fall to 1.10 over the next three months.

Technically, 1.1105 is an important former support level. With the pair now trading below it, 1.1000 is the next major downside level to watch. Any recovery towards 1.1190–1.1200 could face selling pressure.

USD/JPY: 160 is getting closer

The dollar is also gaining against the yen, with USD/JPY trading around 159.58. The wide US-Japan interest-rate gap continues to favour the dollar.

But there is a catch: Japan may step in if the yen weakens too far. The 160 level is therefore more than just a psychological milestone.

A move above 159.10 would keep the upside momentum in focus, while a pullback below 158.50 could signal that buyers are losing control.

GBP/USD: Can the pound hold 1.32?

Sterling has also come under pressure, trading around 1.328 against the dollar. The recent Bank of England rate hike has offered some support, but stronger US rate expectations are currently giving the dollar the upper hand.

The 1.3270–1.3280 area is the first support zone to watch. A clear break lower could expose 1.3150, while a recovery above 1.3370 would ease some of the immediate selling pressure.

What could move the dollar next?

Friday's US Producer Price Index (PPI) and further Fed comments are the next catalysts. Another strong inflation reading could push Treasury yields higher and give the dollar another leg up. A weaker result, however, may

prompt traders to take profits after the recent rally.

For forex traders, the focus is shifting from whether the Fed will cut rates to how much further it might tighten. That change in expectations is already being reflected across the major currency pairs.