Forex News
The United States had an annual inflation rate of 3.7% in September when tracked by the Consumer Price Index (CPI), up from August’s 3.4% increase, as revealed by the US Bureau of Labor Statistics (BLS) on Wednesday. In addition, these figures came in above the market forecast.
The core Consumer Price Index, excluding fluctuating food and energy costs, increased by 2.6% in the same month, up from August’s 2.4% rise.
Monthly, the CPI and core CPI rose by 0.6% and 0.3%, respectively.
Market reaction
The buying momentum in the US Dollar (USD) now gathers traction, prompting the US Dollar Index (DXY) to keep its trade well above the key 102.00 barrier amid rising US yields across the curve.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
(This story was corrected on October 14 at 13:30 GMT to say that the US CPI date release was on Wednesday and not on Tuesday , as previously stated)
This section below was published as a preview of the US Consumer Price Index (CPI) data at 9:30 GMT
- The US Consumer Price Index is expected to rise by 3.6% YoY in September.
- Annual core CPI inflation is expected to edge higher to 2.5% from 2.4% in August.
- The inflation report could influence the Fed’s policy outlook and drive the US Dollar valuation in the near term.
The US Bureau of Labor Statistics (BLS) will publish the September Consumer Price Index (CPI) data on Wednesday. The report is expected to show a further increase in headline prices and a small uptick in annual core inflation. Any divergence from analysts’ estimates could influence the Federal Reserve’s (Fed) policy outlook and impact the US Dollar’s (USD) valuation.
The monthly CPI is forecast to rise 0.6%, following the 0.4% increase recorded in August, while the annual reading is seen edging higher to 3.6% from 3.4%. Core CPI figures, which exclude volatile food and energy prices, are expected to rise 0.2% and 2.5%, on a monthly and yearly basis, respectively.
Crude Oil prices rose sharply in the first half of September before correcting lower in the second half. Still, West Texas Intermediate (WTI) gained about 5% for the month. In this period, diesel prices per gallon in the US increased from $5.6 to $6.38, rising about 14%.
Chart: https://fred.stlouisfed.org/series/GASDESW
Analysts at Societe Generale highlight diesel’s outsized role in shaping US inflation dynamics, noting that “few fuels are as deeply embedded in the US economy as diesel, with its importance spanning freight, agriculture, construction and industry.” This deep integration creates “a clear transmission channel from diesel prices into broader inflation,” and the bank stresses that “the empirical relationship is striking – diesel price changes explain roughly 70% of the variation in US inflation surprises.” Societe Generale calculates that “a 1% YoY increase in diesel prices is associated with a 0.06 percentage point rise in the inflation surprise,” underscoring how moves in this single fuel can materially influence headline inflation outcomes.
How could the US Consumer Price Index report affect EUR/USD?
Some relatively cautious comments on further policy tightening from Fed policymakers and the disappointing September labor market caused investors to scale back bets for a 25 basis points (bps) interest rate hike in October. According to the CME FedWatch Tool, markets are currently pricing in about an 80% probability of a policy hold at the upcoming meeting.
Fed Vice Chair for Supervision Michelle Bowman said there is "no urgent need for more rate moves this year," while Minneapolis Fed President Neel Kashkari told Bloomberg that if they keep raising rates, they will put different pressure on different parts of the economy. On a similarly cautious note, Fed Governor Christopher Waller said that they need to hike the policy rate further but added that they also need to be flexible about the pace. In the meantime, the Bureau of Labor Statistics reported that Nonfarm Payrolls rose by 29K in September, missing the market expectation of 90K by a wide margin, and the Unemployment Rate edged higher to 4.2% from 4.1% in August.
At this point, a significant upside surprise, at least a reading of 0.7% or higher, in the monthly CPI print could revive October rate hike expectations or confirm the federal funds rate will be higher than the current level in December, which currently has a probability of about 85%, as it would point to a spillover from high energy prices into the wider economy and consumer inflation. In this scenario, the USD could gather strength with the immediate reaction and cause EUR/USD to come under renewed selling pressure.
Conversely, a soft monthly inflation print of 0.4% or lower could reaffirm a policy hold in October. Even though such a reading is likely to weigh on the USD and help EUR/USD stabilize in the near term, it might not be enough to trigger a steady recovery, given markets’ waning confidence in the European Central Bank’s (ECB) ability to tighten monetary policy amidst the growing uncertainty surrounding France’s fiscal outlook and the widening spread between German and French government bonds, also called Obligations Assimilables du Trésor (OAT).
Finally, a monthly CPI print matching the market consensus, or coming in just 0.1 percentage points below it, could fail to materially alter the market pricing of the Fed rate outlook and have limited impact on the USD’s performance.
Analysts at MUFG/BTMU argue that Marine Le Pen’s, the main opposition party leader in France, fiscal plans are unlikely to materially alter the outlook for French government bonds before voters go to the polls, stating that “this alternative budget is unlikely to make much difference to the risks associated with OATs ahead of the election next year – especially given a plausible scenario of a presidential election run-off in the second round between Le Pen and the hard-left candidate Jean-Luc Melechon, who is now usually polling second on around 20% versus Le Pen on around 30%.” Against this backdrop of persistent political uncertainty and sensitivity to global rates moves, MUFG/BTMU conclude that “EUR/USD downside risks are set to prevail.”
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The EUR/USD pair remains depressed near its lowest level since May 2025 in the 1.1150 price zone, and aims to extend its decline from a technical point of view. The daily chart shows the pair trading below all bearish moving averages, with the 20-day Simple Moving Average (SMA) gathering strong downward momentum at 1.1325. Technical indicators are turning marginally higher after reaching oversold readings, reflecting the near-term bounce rather than suggesting the pair has found an interim bottom.”
Bednarik adds: “Once the October low near 1.1150 gives up, EUR/USD can extend its slide initially towards the 1.1100 area, and then towards 1.1060. The next relevant support is the 1.1000 psychological threshold, although it seems unlikely that the pair will reach such a level just with the CPI release. Conversely, an extension of the ongoing recovery would meet initial resistance at around 1.1260, while once the area is cleared, the rally can continue towards the 1.1320 price zone.”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Economic Indicator
Consumer Price Index ex Food & Energy (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Oct 14, 2026 12:30
Frequency: Monthly
Consensus: 2.5%
Previous: 2.4%
Source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
- EUR/GBP falls to its lowest level since June 2025 as France’s fiscal worries weigh on the Euro.
- Traders weigh ECB warnings on French debt and BoE comments on rate-hike expectations.
- Traders await UK GDP and Eurozone inflation data for fresh clues on the BoE and ECB policy outlooks.
EUR/GBP extends its decline on Wednesday, sliding to its lowest level since June 2025 as fiscal and political concerns in France weigh on the Euro (EUR). Traders also assess fresh remarks from central bank officials on both sides of the Channel. At the time of writing, the cross trades around 0.8438, down 0.12% on the day.
Investors remain concerned about France’s high debt and whether the government can secure parliamentary approval for its deficit-cutting budget. These worries keep French bonds under pressure and weigh on sentiment toward the single currency, with the gap between French and German 10-year yields hovering near 140 basis points (bps).
Bank of France Governor and European Central Bank (ECB) policymaker Emmanuel Moulin said on Wednesday, “France must urgently demonstrate commitment to fiscal consolidation and approve 2027 budget, reduce deficit.” Moulin also noted that “the rise in yields may affect demand and prompt a more moderate response to inflation shock,” adding that “inflation mainly driven by Middle East conflict, energy factors.”
Speaking in Bangkok, ECB President Christine Lagarde said the “primary and initial solution to French debt resides in French fiscal policy.” On inflation, Lagarde said, “Inflation has been rising predominantly but not exclusively as a result of energy prices,” adding, “We're not seeing any second round effects yet.”
Markets expect the ECB to leave interest rates unchanged in October, with another increase anticipated in December. The final September Harmonized Index of Consumer Prices (HICP) report, due on Friday, will provide a fresh check on headline and underlying inflation pressure.
On the UK side, the Bank of England (BoE) has kept interest rates unchanged so far this year. However, higher energy costs threaten to keep inflation above the central bank’s 2% target, increasing market expectations for a rate hike.
BoE Chief Economist Huw Pill said on Wednesday that “underlying UK inflation never fell enough pre-Iran shock,” while “UK output and labor market have proven more resilient.” Pill added, “I am a bit more sceptical about market pricing of four rate hikes over the next year,” but argued that an “early move would've shown BoE wasn't ‘holding and hoping’.”
Attention now turns to Thursday’s UK August Gross Domestic Product (GDP), industrial production and manufacturing production figures. The releases could help traders assess how well the economy is holding up under higher energy costs and whether expectations for BoE tightening remain justified.
Euro Price This Month
The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.20% | -0.02% | 0.67% | -0.12% | -0.86% | 0.30% | -0.31% | |
| EUR | -1.20% | -1.21% | -0.50% | -1.29% | -2.06% | -0.90% | -1.46% | |
| GBP | 0.02% | 1.21% | 0.67% | -0.08% | -0.88% | 0.31% | -0.19% | |
| JPY | -0.67% | 0.50% | -0.67% | -0.82% | -1.56% | -0.32% | -0.93% | |
| CAD | 0.12% | 1.29% | 0.08% | 0.82% | -0.75% | 0.49% | -0.16% | |
| AUD | 0.86% | 2.06% | 0.88% | 1.56% | 0.75% | 1.18% | 0.63% | |
| NZD | -0.30% | 0.90% | -0.31% | 0.32% | -0.49% | -1.18% | -0.59% | |
| CHF | 0.31% | 1.46% | 0.19% | 0.93% | 0.16% | -0.63% | 0.59% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
DBS Group Research economist Philip Wee highlights how upcoming US CPI data will challenge the US Dollar’s hawkish narrative. He notes New York Fed President John Williams supports another rate hike before end-2026 but questions further tightening in 2027. Wee stresses that Core CPI and the broader disinflation trend, rather than headline CPI, will be more important for USD performance.
Core CPI seen driving USD reaction
"New York Fed President John Williams backed another interest rate hike before end-2026 but was reluctant to endorse the market’s pricing for further tightening in 2027."
"Ahead of today’s US CPI release, Williams reminded markets that the Fed remains “data dependent” and not “data-point dependent”. Monetary policy will be guided by the underlying inflation trajectory over the next 1-2 years, rather than individual data releases."
"Against this backdrop, today’s US CPI report should be judged less by the expected acceleration in headline inflation to 0.6% MoM in September from 0.4% in August, but more by the anticipated moderation in core inflation to 0.2% from 0.3%."
"This distinction matters for the USD, whose rally since the September 16 Fed hike has relied heavily on expectations of further tightening."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING’s Francesco Pesole highlights that EUR/SEK has fallen about 1.8% from its early-October high, helped by French fiscal concerns and prior short-term overvaluation. The pair is now seen as fairly valued, unlike cheap EUR/USD. With the Riksbank signalling readiness to hike in November and ECB expectations repriced dovishly, ING’s one-month EUR/SEK target is 11.15, with risks skewed to further downside.
Krona benefits from hawkish Riksbank
"EUR/SEK has corrected around 1.8% from the 1 October 11.36 high, with a major contribution from French fiscal risk. It’s important to note EUR/SEK was starting from a marked (around 2%) short-term overvaluation at the end of September, and it’s now fairly valued – unlike EUR/USD, which is cheap according to our models."
"The move is likely welcomed by the Riksbank, which has been keeping a closer eye on the krona’s weakness now that inflationary risks are rising. September CPIF inflation didn’t scream a rate hike, headline at 1.5% and core at 0.5%, but the Riksbank has clearly signalled it’s ready to hike in November, and we see a high bar for a rethink."
"A hawkish Riksbank and dovish repricing of ECB expectations have narrowed the two-year EUR/SEK swap spread by nearly 20bp over the past couple of weeks. While its correlation with EUR/SEK can be patchy, the move currently supports a lower spot. Our one-month target is 11.15, with risks tilted to the downside."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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