Dollar slips, geopolitical escalation risks seen limited before midterms
TLT•The dollar index fell 0.25% to 102.29 as oil prices eased and investors focused on the Federal Reserve’s rate path. Traders priced an 80% chance the Fed would hold rates this month, while the euro and yen advanced against the dollar.
1. Dollar and Fed outlook
The dollar slipped from an 18-month high on Tuesday as oil prices retreated and investors focused on Wednesday’s US consumer price data. Market participants were betting that Middle East tensions would remain contained ahead of US midterm elections. Traders priced an 80% chance of the Fed holding rates this month, up from 51% a month earlier, and 75 basis points of tightening by late 2027.
2. Euro and yen advance
The euro rose 0.34% to $1.1193 after reaching a roughly 17-month low on Monday, despite higher gas prices and continued concern over France’s fiscal outlook. The yen gained 0.28% to 158.16 per dollar after Japanese wholesale prices rose 6.8% year over year in September, below the 7.6% market forecast.
3. Other currencies
The offshore yuan traded near a four-year high, while the Australian dollar was little changed after minutes showed the Reserve Bank of Australia’s September meeting unanimously voted to raise rates for a fourth time this year. The bank said inflation could prove more persistent than assumed, leaving open the possibility of another hike.
