1 hr ago
Dollar Flat After Softer-than-Expected US Inflation Reduces Fed Rate Hike Bets
The US dollar did not move much against other major currencies.
A key measure of US inflation increased less than economists expected.
This made investors think the Federal Reserve might be less likely to raise interest rates soon.
The expected chance of an October rate hike fell to 37%.
US government bond yields also moved lower, especially at the short end.
The dollar was still set to gain for September against the euro, Swiss franc and pound.
Oil prices rose as talks between the United States and Iran stalled.
The euro, pound and Australian dollar each had different daily moves against the dollar.
The US Personal Consumption Expenditures Price Index rose 0.3% in August, below the 0.4% forecast.
Markets reduced the probability of an October Federal Reserve rate hike to 37%, from 70% a week earlier.
US Treasury yields initially fell, with the two-year yield last down 0.4 basis points at 4.885%.
The dollar remained broadly flat but stayed on track for monthly gains against the euro, franc and pound.
Brent crude settled 0.92% higher at $103.53 per barrel and was headed for a strong monthly gain.
- Who
- The US dollar, major currencies, investors and the Federal Reserve.
- What
- The dollar was broadly flat after softer-than-expected US inflation reduced expectations for an October Federal Reserve rate hike.
- Where
- In global currency and financial markets, with trading reported from New York.
- When
- Wednesday, September 30; the inflation data covered August.
- Why
- The PCE inflation increase was below forecasts, reducing expectations for near-term Federal Reserve rate increases and narrowing the dollar’s yield advantage.
Key facts
- August PCE increase
- 0.3%, compared with economists’ 0.4% forecast
- October Fed hike probability
- 37%, down from 70% a week earlier
- Two-year Treasury yield
- 4.885%, down 0.4 basis points
- Dollar index
- Flat at 101.47
- Euro
- Flat at $1.133050
- Brent crude settlement
- $103.53 per barrel, up 0.92%
- September dollar performance
- On track for monthly gains against the euro, Swiss franc and pound sterling
Quotes
John Velis
FX and macro strategist at BNY
“We can't tell if the revised PCE data by itself or if other factors were responsible for a softer-than-expected print, which initially caused bonds to rally and yields to come down and the dollar to weaken.”
livemint.com
Joel Kruger
Markets strategist at LMAX Group
“Today's softer PCE report, following (Federal Reserve Bank of New York President John) Williams' pushback against the urgency of another hike, has prompted a meaningful reduction in expectations for consecutive Fed rate increases.”
livemint.com
Sources
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