Dollar retreats from 18-month high despite hot CPI as Fed officials temper hike bets

According to Business Recorder, the US dollar eased from an 18-month peak on Thursday even though inflation data came in hotter than forecast. Traders scaled back bets on an October Fed rate increase after cautious comments from policymakers and a retreat in Treasury yields. The euro and sterling both recovered modestly against the greenback, with the euro up 0.3% at $1.1187.

Core consumer prices rose 0.3% in September, above the 0.2% economists had expected, while the annual core rate reached 2.6% against a forecast of 2.5%. The headline annual rate climbed to 3.7%, also ahead of the 3.6% estimate. Market pricing for an October Fed hike briefly climbed to 50% after the release.

Remarks by Fed officials such as Michelle Bowman and Mary Daly suggested policymakers are prepared to hold off until the picture becomes sharper ahead of their October 27-28 meeting. Khoon Goh of ANZ said markets seemed to conclude that the figure was insufficient to push policymakers into acting in October, and pointed out the gathering comes just a few days ahead of the midterms. Lower Treasury yields also weighed on the dollar, with the 10-year yield sliding to its lowest level in three weeks at 5.1267%.