U.S. markets opened on Friday with a muted equity backdrop, but the foreign‑exchange arena showed a clear strain on liquidity. A modest 0.20% rise in the dollar index, bolstered by a four‑basis‑point lift in the 10‑year Treasury yield, set the tone for a session where sterling‑dollar and sterling‑euro pairs opened with noticeable price gaps.

Dollar Strength Finds Support in Treasury Yields

The dollar’s advance was anchored by the surprise uptick in the benchmark 10‑year note, which rose 4 bps after stronger‑than‑expected U.S. data. That move gave the greenback a foothold against a basket of currencies, including the Australian and Euro. AUD/USD posted a 0.22% gain on Friday, reclaiming the 0.70 level and eyeing resistance near 0.71, while EUR/USD remained under pressure, trading below its weekly moving averages and edging toward oversold territory on the RSI.

Meanwhile, the Mexican peso managed a 0.30% lift against the dollar but still faces a weekly decline of more than 1% amid lingering risk concerns. The broader FX picture reflects a dollar that is still the safe‑haven anchor ahead of the September CPI release slated for October 14, a data point that could dictate whether the Federal Reserve holds steady before a potential December rate hike.

Sterling Crosses and Session Gaps Reveal Thin Liquidity

Britain’s pound opened with pronounced gaps against both the dollar and the euro. GBP/USD opened lower by roughly 15 pips, creating a gap that traders rushed to fill as the session progressed. The gap reflected the market’s attempt to reconcile the dollar’s modest rally with the pound’s own domestic data, which showed little to move the needle on UK inflation expectations.

GBP/EUR displayed a similar pattern, opening with a gap that widened the spread between the two currencies. The lack of depth in the order books meant that even small shifts in U.S. Treasury yields or dollar index movements produced outsized price swings in sterling crosses. Market participants cited the combination of a strong dollar and limited liquidity as the primary driver of these gaps.

Equity investors, meanwhile, kept a watchful eye on the upcoming CPI figures and the Fed’s policy outlook. The prevailing narrative suggests a pause in rate hikes before a possible December increase, a scenario that could sustain the dollar’s current support levels while keeping FX liquidity tight.

Overall, the session highlighted how a modest rise in Treasury yields can amplify dollar strength, while thin liquidity in the sterling market amplifies price gaps. Traders will likely monitor the CPI release and any Fed commentary for clues on whether the dollar’s support can hold, or if further gaps may emerge in the sterling crosses as liquidity ebbs and flows.