Dollar Supported by Expectations of Further Fed Rate Increases

what happened

Dow Jones Newswires reports that the dollar remains firm as markets assess the prospect of additional Federal Reserve rate increases. ING says solid U.S. growth and inflation above target could keep tightening expectations in place until next spring. The main focus is Wednesday’s release of September U.S. consumer-price data, with core inflation seen at 0.2% month-on-month by consensus and risks to that forecast on the upside. The DXY dollar index is up 0.2% at 102.376–102.398; ING expects it to reach 102.850 this week. LSEG data show an 18% market-implied probability of a Fed rate increase later this month.

Higher oil prices are also supporting the dollar after doubts emerged over President Trump’s announced Russia-Ukraine energy ceasefire and amid the continuing Middle East conflict. Renewed gains in crude could revive inflation concerns and put upward pressure on Treasury yields. U.S. long-end yields may remain elevated because of persistent concerns about the country’s fiscal outlook, while the Treasury market is closed Monday for Columbus Day.

In the U.K., 10-year gilt yields are down about 3.5–3.9 basis points but remain near multidecade highs. Sterling trades at $1.3235 ahead of the October 28 budget, while French fiscal risks continue to weigh on the euro. Malaysia’s 2027 budget is viewed as neutral to mildly positive for equities: development spending is set to rise to 83 billion ringgit from a revised 81 billion ringgit in 2026, although a minimum-wage increase to 2,000 ringgit could pressure labor-intensive companies’ margins.

why it matters

The U.S. core-inflation reading is the immediate market focus. A stronger result could reinforce the dollar and bond yields, while a softer figure may only modestly reduce near-term tightening expectations. Fiscal concerns in the U.S., U.K. and France, alongside oil-price and geopolitical developments, remain additional sources of market volatility.

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