The dollar experienced a modest uptick against its major counterparts on Thursday, as traders braced for the upcoming U.S. consumer inflation data set to be released on Friday. This anticipation coincided with ongoing tariff threats between Washington and Beijing, impacting overall market sentiment.
In parallel, the yen fell to a one-week low against the dollar amid expectations for a substantial stimulus package from Japan’s new Prime Minister, Sanae Takaichi. Analysts widely regard this plan as favoring both fiscal and monetary easing, which has left the yen vulnerable in the foreign exchange market.
Meanwhile, the British pound remained under pressure following the release of consumer inflation data that showed a steadiness at 3.8% for the previous month, contrary to predictions of an uptick. This unexpected figure prompted traders to adjust their expectations regarding the Bank of England’s monetary policy. Specifically, there was a surge in the odds for a rate cut at the bank’s December meeting, jumping from 46% to 75% after the inflation data, although these figures retreated to 61% on Thursday.
As of the latest figures, the U.S. dollar index rose by 0.05% to 98.979. Against the yen, the dollar increased by 0.17%, reaching 152.21 yen, and previously hitting 152.26 yen for the first time since October 14. The pound dipped 0.09% to $1.3345, and the euro marginally weakened by 0.06% to $1.1604.
This week, President Trump’s administration has been contemplating restrictions on a variety of technology exports to China, as a form of retaliation against the recent export restrictions imposed by Beijing on rare earth materials. Despite these developments, the currency market reaction has remained relatively calm, with traditional safe-haven currencies like the yen and Swiss franc showing minimal support. Gold prices have also slipped from their record highs.
Kyle Rodda, a senior financial markets analyst, commented on the situation, stating, “Trade tensions remain the driver of volatility in the markets, but it can be strongly argued market participants expect these threats not to materialize into action.” This sentiment reflects a belief among market players that such trade threats serve more as a negotiation tactic than genuine escalations.
As the U.S. government shutdown extends into its 23rd day, a lack of official macroeconomic data continues to weigh on market sentiment, although the delayed consumer price index report is expected to offer some insights, even if its significance is being downplayed. National Australia Bank strategist Gavin Friend remarked, “Markets are marking time. There’s not a lot of reliable news.”
Friend further indicated that the CPI report is being viewed as inconsequential since traders largely expect the Federal Reserve to implement rate cuts in both October and December, with market-implied odds for a quarter-point cut standing at an impressive 97% for the meeting on October 29.
Meanwhile, the Bank of Japan’s policy decision is anticipated on October 30. Market expectations suggest a 20% chance of a quarter-point rate hike being announced, although most economists believe such a move is unlikely until December at the earliest. Takaichi is reportedly preparing an economic stimulus package exceeding last year’s $92 billion figure to assist households facing inflation, with details of the plan still being finalized and a potential announcement expected next month.
