Dollar retreats from 18-month high despite hot CPI as Fed officials temper hike bets
TLT•The dollar slipped 0.1% from an 18-month high after Fed officials’ cautious remarks and falling Treasury yields led traders to scale back October rate-hike bets, despite September core CPI rising 0.3% month over month and 2.6% year over year.
1. Dollar gives back gains
The dollar index fell 0.1% to 102.06, giving back most of its gains after hotter-than-expected inflation data had lifted it to an 18-month high. The euro rose 0.3% to $1.1187 and sterling gained 0.2% to $1.3224.
2. Rate-hike bets ease
US core consumer prices rose 0.3% in September, above economists’ 0.2% estimate, and were up 2.6% year over year, compared with a 2.5% forecast. Market pricing for an October Fed rate hike briefly rose to 50%, but comments from Fed officials, including Michelle Bowman and Mary Daly, that the central bank could wait for a clearer picture prompted traders to pare back those bets.
3. Yields and data ahead
A rally in US Treasuries pushed yields lower, weighing on the dollar. The 10-year Treasury yield fell to a three-week low of 5.1267%; investors were focused on US producer price and retail sales data due later in the day.
