Dollar Steadies as Inflation Data Eyed

The dollar index held above 102 on Monday following four consecutive weeks of gains, as investors cautiously awaited key inflation reports due this week for fresh signals on the Federal Reserve’s next policy move. The September consumer and producer price indexes are scheduled for release on Wednesday and Thursday, respectively. A stronger-than-expected inflation reading could reignite the recent bond selloff by increasing pressure on the Fed to pursue a more aggressive tightening path. Markets are currently pricing in an approximately 83% chance that the Fed will leave interest rates unchanged this month, while the probability of a rate hike in December stands at around 86%. Meanwhile, oil prices declined on hopes that Russian diesel can ease global fuel shortages, reducing inflationary risks. President Trump said Moscow agreed to release diesel fuel to global markets, while claiming that Russia and Ukraine had agreed to an “energy ceasefire” that would take effect immediately.

The US dollar index was little changed around 102.1 on Friday but remained on track for a nearly 0.2% weekly gain, marking its fourth consecutive week of advances and pushing the greenback to its highest level since April 2025. Investors continued to assess developments in the Middle East and their implications for energy prices and inflation. Oil prices eased after US President Trump pledged to refrain from attacking Iran until after the midterm elections, helping to ease concerns over further energy supply disruptions. Nevertheless, markets continued to price in the prospect of the Federal Reserve keeping interest rates higher for longer to contain persistent inflationary pressures. The probability of the Fed holding rates steady this month stood at around 81%, while the odds of a 25bps rate hike in December were approximately 69%.

The US dollar index slipped to around 102 on Friday, extending losses from the previous session as Treasury yields declined following a well-received 30-year bond auction, suggesting investors remain willing to purchase long-dated government debt despite the recent market selloff. Investors also assessed lower oil prices after President Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections. Meanwhile, markets are pricing in roughly an 82% probability that the Federal Reserve will keep interest rates unchanged this month, while the odds of a December rate hike stand at around 81%. On Thursday, Fed Governor Christopher Waller said further rate increases would likely be necessary to bring inflation back to the central bank’s 2% target, but noted that policymakers had “flexibility” in determining the pace of tightening and left open the possibility of a pause at the Fed’s upcoming October meeting.