The U.S. dollar slipped modestly on Wednesday but remains close to its highest level in nearly two months, with the dollar index easing 0.2% to 101.22. The move followed remarks from New York Federal Reserve President John Williams, who said there is “no need for urgency” to raise interest rates further. His comments prompted traders to cut the probability of an October Fed rate hike from more than 70% to roughly 50%.
Traders are now focused on the August Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, due at 8:30 a.m. ET. Economists expect the core reading to hold at 3.3% year-over-year. A hotter print could revive rate-hike bets, while a cooler number may ease pressure in bond markets. The same session’s ADP data showed private payrolls rose by 90,000 in September, above forecasts of about 70,000 and up sharply from a revised 36,000 in August.
Treasury yields remain elevated, with the 10-year yield near 5.21%, a multidecade high, and the 2-year yield around 4.9%. Oil prices are also in focus, holding in the mid-$90s per barrel as the Iran conflict continues, which could feed back into inflation.
In currency markets, the Japanese yen strengthened 0.3% to 156.77 per dollar after officials reiterated warnings over disorderly moves. The Australian dollar fell to a nine-week low below $0.70 after softer-than-expected monthly inflation, despite the Reserve Bank of Australia’s rate hike to 4.60%. The euro edged up to $1.1354 but is still tracking its largest monthly drop against the dollar in 14 months, pressured by energy costs and French political tensions. The Chinese yuan held near 6.71 per dollar after official data showed manufacturing returned to growth in September.
For crypto markets, the macro backdrop remains a key driver of risk sentiment. Softer Fed rate-hike expectations could offer some relief, but elevated Treasury yields and pending inflation data leave the outlook uncertain.
