The US 10-year Treasury yield has edged up to 4.50% – the highest since 2007. This grind higher in US yields – marking higher risk-free rates – creates headwinds for risk assets such as equities, credit and emerging markets. Indeed, even the AI-powered S&P 500 is having a bad month, though it is still up 12.8% year-to-date. This equity correction is supportive news for the Dollar.

Expect DXY to remain bid and there is a scenario where the Dollar stays strong into mid-October, when large US corporates based in California need to pay their taxes.