Dollar Rises Ahead of Key U.S. Inflation Report; Euro and Yen Slip
The U.S. dollar strengthened on Friday in calm trading as investors waited for key inflation data that could guide the Federal Reserve’s next rate moves.
At 04:20 ET (08:20 GMT), the Dollar Index—which measures the greenback against six major currencies—was up 0.1% to 98.825, heading for a weekly gain of 0.6%.
Focus on U.S. Inflation and Fed Policy
The U.S. Consumer Price Index (CPI) for September will be released later today, after being delayed by the government shutdown. This report is expected to shape expectations for the Federal Reserve’s monetary policy for the rest of the year.
Economists forecast a 0.4% rise in headline CPI and a 0.3% increase in core CPI month-over-month. The Fed is expected to cut interest rates by 25 basis points next week, but this inflation reading could influence decisions for the December meeting.
According to ING analyst Francesco Pesole, although tariffs have increased prices in some sectors, “airfares, hospitality, and housing should pull CPI lower.” With both headline and core inflation near 3%, the Fed may continue signaling further rate cuts into year-end. However, with limited jobs data, analysts see uncertainty beyond December.
Geopolitical Developments Add Market Pressure
Traders are also watching news that President Donald Trump will meet Chinese President Xi Jinping in South Korea during next week’s APEC summit. Meanwhile, the U.S. announced new sanctions on Russian energy giants Rosneft and Lukoil due to the war in Ukraine.
Reports suggest that Indian and Chinese refineries may pause Russian oil imports. A notable decline in Russian oil supply could push Brent crude prices back to $70–$75, potentially boosting the U.S. dollar, Pesole added.
Euro Steady After Strong German Data
In Europe, EUR/USD traded slightly lower at 1.1616 even after Germany’s private sector showed its fastest growth in over two years. The HCOB flash composite PMI rose to 53.8 in October, beating forecasts of 51.5 and signaling robust services growth.
Pesole noted that while rising oil prices may add downside pressure to the euro, the 1.160 level is likely to remain the short-term support.
British Pound Dips Despite Strong Retail Sales
The British pound slipped 0.1% to 1.3312, even as U.K. retail sales rose 0.5% in September, exceeding expectations. Although growth slowed slightly from 0.6% in August, the data from the Office for National Statistics indicated that U.K. consumers remain resilient.
Yen Weakens as Inflation Surpasses BOJ Target
The Japanese yen dropped 0.2% to 152.85 against the dollar after data showed core inflation rose 2.9% in September, while the “core-core” index—excluding food and energy—hit 3.0%. Both figures remain above the Bank of Japan’s 2% target, fueling speculation about a possible policy tightening.
However, factory activity slipped to a 19-month low, highlighting weakness in manufacturing, while services PMI eased slightly but stayed in expansion territory due to strong domestic demand.
Other Currency Moves
The Chinese yuan (USD/CNY) was steady at 7.1223, with investors monitoring developments around Trump’s meeting with Xi Jinping.
The Australian dollar (AUD/USD) fell 0.1% to 0.6503, while the New Zealand dollar (NZD/USD) gained 0.1% to 0.5752.
