EUR/USD fell to a two-month low on Friday as the U.S. dollar extended a broad weekly advance supported by surging Treasury yields and growing expectations that the Federal Reserve may tighten policy again. Reuters reported that the euro dropped to $1.1370, putting the pair on track for a third straight weekly decline and its longest weekly losing streak since the end of 2025. The same report said the dollar was heading for its first back-to-back weekly gains in more than three months.
The move reflected a sharp repricing in U.S. rate expectations after the Federal Reserve tightened policy last week. Reuters said robust economic data and renewed energy-related inflation concerns had reinforced expectations for further increases in U.S. interest rates. Long-dated Treasury yields climbed to their highest levels in more than 20 years, giving the dollar additional support. FXStreet likewise reported that the U.S. Dollar Index had reached its highest level since late July near 101.40 before easing toward 101.00 during Friday trading.
EUR/USD remained under pressure throughout that shift in the rates backdrop. FXStreet said the pair continued to trade near multi-week lows as the dollar held its recent gains, while Reuters put the session low at $1.1370. The weekly pattern was also notable: Reuters said the euro was heading for its third consecutive weekly loss. With the dollar strengthening against several major currencies at the same time, the pressure on EUR/USD reflected a broad U.S.-currency move rather than a euro-specific headline alone.
Sterling showed a similar pattern. Reuters reported GBP/USD near $1.3220, close to a three-month low and on course for its weakest weekly performance in four months. FXStreet separately said GBP/USD was holding just above the 1.3200 area after touching its lowest level since June 29. The outlet linked the pair’s weakness to a combination of a hawkish Federal Reserve outlook, elevated U.S. bond yields and a softer relative backdrop for sterling.
The Japanese yen was also weak against the dollar, underscoring the breadth of the move. Reuters said USD/JPY was near a three-week low for the yen at about 158.8, while noting that intervention risk remained in focus. The same broader dollar strength was visible across the major-pair complex, with the Reuters report showing the dollar index up more than 1% for the week and near a two-month high.
What it means for traders: the main driver across EUR/USD and GBP/USD is the widening influence of U.S. rate expectations on major currency pairs. Higher Treasury yields and a stronger probability of additional Fed tightening are supporting the dollar, while the euro and pound remain near recent lows. The current setup means the next moves in these pairs are likely to remain sensitive to changes in U.S. yields and any fresh evidence that alters expectations for the Fed’s policy path.
The next focus is on U.S. economic data and Federal Reserve communication. FXStreet highlighted August Durable Goods Orders and the final September University of Michigan Consumer Sentiment reading on Friday’s calendar, alongside scheduled remarks from Fed officials. Any data or commentary that changes expectations for the next policy move could feed directly into Treasury yields and the dollar, leaving EUR/USD and GBP/USD closely tied to the evolving U.S. rates outlook.