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Sr. Technical Strategist
U.S. core inflation rose from 2.4% to 2.6%, and headline CPI climbed from 3.4% to 3.7%, topping expectations for a 3.6% print. That firmer core reading briefly pushed markets toward pricing a Federal Reserve rate hike at the October meeting, sending the U.S. dollar higher. Within a day, comments from Federal Reserve officials signaling no urgency to tighten unwound much of that move. The result is a split screen, with underlying inflation still firming and policymakers leaning toward patience.
Michael Boutros, StoneX Media Senior Market Analyst, has spent more than two decades trading and analyzing FX, commodities and equity indices across numerous trade desks. He tracks the U.S. dollar through a structured technical lens across multiple time frames, with a medium-term focus on how event risk such as inflation data and central bank commentary moves markets.
U.S. core inflation rising from 2.4% to 2.6% gave markets fresh reason to price a Federal Reserve rate hike at the October meeting, and fed funds futures moved quickly to reflect it. According to Boutros, "Fed fund futures had risen to an expectation of potentially 50/50 for a rate hike" in the wake of the release. Notably, the firmer core reading arrived alongside a headline CPI print of 3.7%, beating the 3.6% consensus. For traders, that combination of hotter core and headline inflation explains why rate expectations repriced so sharply in a single session.
Federal Reserve officials pushed back on hike expectations despite firmer U.S. core inflation, and Treasury yields and the U.S. dollar reversed in response. San Francisco Federal Reserve President Mary Daly acknowledged that additional tightening would likely be necessary but stressed there was no urgency to act, a message echoed by Michelle Bowman and New York Federal Reserve President John Williams. "The entire trade was retraced after we got comments from Fed officials essentially pushing back against those expectations," Boutros said of the overnight reversal. The 10-year and 30-year Treasury yields both turned lower from technical resistance, on track for their largest single-week decline since February, with the U.S. dollar "following suit". That leaves the gap between firming core inflation and a patient Federal Reserve at the center of the near-term rate debate.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
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