Powell exits as inflation fears drive yields to multi-year highs
Fed Chair Powell's final day saw US Treasury yields spike to multi-year highs as rising oil prices fueled renewed inflation fears, pressuring risk assets and the dollar.
Federal Reserve Chair Jerome Powell's eight-year tenure ended on Friday, with markets under heavy pressure as US Treasury yields surged to multi-year highs on renewed inflation fears.
The 2-year note yield rose 8.7 basis points on the day to 4.079%, its highest since March 2025, while the 10-year yield climbed 13.8 basis points to 4.597%, the highest since May 2025. A key driver was another sharp rise in oil prices, with WTI crude for July delivery settling at $101.16, up 4.37%. The move reflects growing concern that persistent inflation will force the Fed to maintain a hawkish stance even as Powell exits.
For currency traders, rising US yields typically support the dollar through wider rate differentials, but the accompanying risk-off sentiment can complicate the picture. Higher yields attract capital inflows, but if driven by inflation fears, they may also weigh on equities and commodity currencies. The dollar index initially rallied but later pared gains as traders weighed the implications of Powell's departure and the inflation outlook. For real-time pricing on major pairs and yield levels, check NowPrice's fx page.
Looking ahead, markets will focus on incoming Fed speakers and next week's FOMC minutes for clues on the policy path. The oil rally remains a wildcard; if crude continues to climb, inflation expectations could push yields even higher, testing resistance at 4.65% on the 10-year. Traders should also watch for potential intervention rhetoric from the Bank of Japan if USD/JPY approaches recent highs.