US Dollar Flat After Softer-Than-Expected Inflation Data
The US dollar remained flat against major currencies on September 30, following softer-than-expected inflation data. The Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation gauge, rose by 0.3% in August, lower than the anticipated 0.4%. This reduced market bets on an interest rate hike from the Fed.
John Velis, FX and macro strategist at BNY, noted that the revised PCE data and other factors were responsible for the softer-than-expected print. The dollar initially weakened as US Treasury yields fell across the board, but then recovered.
The euro remained flat at $1.133050, while the single currency is still headed for a monthly loss against the dollar after two consecutive months of gains. Oil prices rose and were on track for a big monthly gain in September, with the Brent November futures contract settling at $103.53 a barrel.
Traders are now pricing a 37% probability of a Fed rate hike in October, down from 70% a week ago, according to the CME's FedWatch tool. This repricing is pulling Treasury yields lower and narrowing the dollar's yield advantage, giving the latest wave of dollar selling a clear fundamental catalyst.