Market analysis on behalf of Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A
The US dollar was relatively stable after a decline yesterday. Treasury yields eased to some extent ahead of the September consumer price index. Recent Federal Reserve remarks have reduced expectations for tightening beyond this year, weighing on yields to some extent.
New York Fed President John Williams still sees scope for one further hike this year but little reason at this stage to tighten again in 2027, while Governor Christopher Waller argued that inflation expectations remain anchored, weakening the case for urgent hikes. Their remarks contrast with Cleveland Fed President Beth Hammack’s call earlier this week for a swift move towards a more restrictive stance. Markets continue to assign around a 20% probability for an interest rate hike at this month’s meeting, while still expecting one increase by year-end.
Attention now turns to today’s CPI report, with headline inflation expected to rise to 3.6% year-on-year. A stronger-than-expected reading could lift short-dated yields and the dollar. A clear downside surprise, however, could put the year-end increase itself into question and pull the dollar down. Remarks from other Fed officials could also shape market sentiment. A message closer to Hammack’s would reinforce tightening expectations, while a tone more consistent with Waller’s could keep pressure on yields and the currency.
Zaid Barem / ymm
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