Forex News

United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann note that USD/CHF remains locked in a tight range, with intraday expectations between 0.8315 and 0.8350. For the 1–3 weeks horizon, they see the Dollar trading within 0.8295/0.8365, citing tentative momentum. Over 1–3 months, they expect further rebound but not enough strength to revisit the July peak.

Dollar seen confined to tight ranges

"24-HOUR VIEW: After USD rose to a high of 0.8350 two days ago, we highlighted yesterday that “the sharp rise appears to be excessive, and USD is unlikely to rise much further.” We expected USD “to trade in a higher range of 0.8320/0.8355.” USD subsequently traded between 0.8311 and 0.8348, closing 0.25% lower at 0.8323. The current price movements appear to be part of an ongoing range-trading phase. Today, we expect USD to trade between 0.8315 and 0.8350."

"Last Friday (02 Oct, spot at 0.8310), we indicated that USD “has likely entered a range-trading phase 0.8245 and 0.8365.” Yesterday (13 Oct, spot at 0.8345), we highlighted that “we continue to expect range-trading but now expect a narrower range of 0.8295/0.8365.” There is no change in our view."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

MUFG’s Derek Halpenny highlights that G10 FX volatility has eased after the recent spike driven by higher US yields, but warns risks remain skewed to renewed turbulence. He links Middle East tensions, potential US involvement, and energy prices to further upside in yields and Dollar strength. September US CPI is seen as pivotal for rates, with a strong print supporting another leg higher for the Dollar and DXY.

Yields and CPI drive Dollar

"G10 FX volatility is starting to turn lower again after the recent spike higher as the US dollar strengthened in response to the surge in sovereign bond yields. There has been a similar modest retracement in bond market volatility as well and if bond yields have settled around a new equilibrium then we could see volatility come down further in both rates and FX. However, the risks appear greater to us that we could still have further to go in this current spike in yields."

"Inflation data from the US today is very important and that will shape the very near-term direction of rates and a softer print would help ease the broader risks but the current conditions and geopolitical backdrop still point to increased risks of more volatile financial market conditions that would, at least initially, be supportive of another leg stronger for the dollar."

"Near-term though the Fed look set to hike again and any upside surprise in today’s data would likely trigger another rates sell-off and extend the dollar further stronger. Based on our 2-year UST bond yield projections, the DXY could certainly advance to the 105-level that would imply EUR/USD potentially falling below the 1.1000-level."

"A consensus CPI print today is unlikely to alter rate expectations much and a meaningful miss to the downside (0.0% m/m core) would be required to see a notable dollar sell-off."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The US Dollar turns slightly positive after recovering early losses ahead of the US CPI release.
• Financial markets see the US headline CPI arriving higher at 3.6% YoY in September.
• Almost every Fed member has warned of upside inflation risks since the September policy outcome.

The US Dollar (USD) claws back its early losses and ticks higher ahead of the United States (US) Consumer Price Index (CPI) data for September releasing at 12:30 GMT.

In the European trade, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally higher to near 102.24.

US inflation preview highlights divergence between headline and core

Analysts at Rabobank preview the US September CPI release, noting that "headline CPI is expected to accelerate to 3.6% y/y and 0.6% m/m from 3.4% y/y and 0.4% m/m prior." In contrast, they expect underlying price pressures to ease, with "core CPI inflation expected at 2.5% y/y and 0.2% m/m from 2.45% y/y and 0.29% m/m," adding that "energy [is] likely to account for the divergence between headline and core expectations."

Investors will pay close attention to the US inflation data to get fresh cues regarding the Federal Reserve’s (Fed) interest rate outlook. Several policymakers have argued about persistent inflation risks and have indicated that both energy supply risks and Artificial Intelligence (AI)-driven demand are boosting price pressures.

Fed’s Collins keeps hawkish bias but flags data dependence into the new year

Fed’s Collins scores 7.1 on the FXS Speechtracker, modestly above the 6.7 historical average, underscoring a tone that remains firmly focused on inflation risks relative to the established baseline. The emphasis on an “elevated risk of high inflation” as the main focus, expectations for inflation to stay above 2% due to high energy prices, and explicit support for the September rate hike all reinforce a hawkish stance, even as comments on a broadly balanced job market and resilient growth introduce a measured, data-dependent nuance. References to a stable job market supporting consumer spending and data-center build out pressuring inflation readings further highlight concern that underlying price pressures could persist into the new year.

The FXS Fed Sentiment Index fell by 2.23 points to 131.63, signaling a modest pullback in perceived hawkishness despite the above-baseline speech score on the FXS Speechtracker. With the index still well above the neutral 100 mark, the Fed’s overall stance remains in hawkish territory, but the decline suggests markets see a slightly lower probability of additional aggressive tightening even as inflation risks stay front and center.

Regarding the likely impact of the US CPI data on Fed’s interest rate expectations, strategists as OCBC have said in a note “If core inflation moderates as expected, markets could further trim expectations for additional Fed tightening.” OCBC added, “It would likely take a core CPI print of 0.4% m/m or higher to materially shift market pricing and strengthen the case for earlier Fed action.”

US Dollar Index Technical Analysis

In the daily chart, Dollar Index Spot trades at 102.24, extending its advance after reclaiming the 102 handle, which keeps the near-term bias bullish. Price holds comfortably above prior consolidation levels near the upper 90s and low 100s, suggesting underlying demand remains in place, while the Relative Strength Index (14) at 66.32 hovers just below overbought territory and hints at strong but maturing upside momentum.

With no nearby moving averages or Fibonacci levels specified, the technical focus stays on price action and momentum, where the index is supported by its recent sequence of higher lows and steady grind higher. As long as the RSI holds elevated without a sharp reversal, dips are likely to attract buyers, though the proximity to overbought conditions cautions against chasing the move aggressively at current levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• USD/CAD approaches 1.4200 after retreating from 1.4283 highs on Tuesday.
• Oil prices crawl to levels near one-month highs, providing support to the commodity-sensitive CAD.
• The US Dollar loses ground amid dovish comments by Fed's Williams and with all eyes on US CPI data.

The Canadian Dollar (CAD) appreciates for the second consecutive day on Wednesday, with Oil prices near monthly highs and the US Dollar (USD) on its back foot following some dovish Fed speak. The USD/CAD pair is trading just above the bottom of October’s trading range, in the 1.4200 area, after a knee-jerk reaction above 1.4280 on Tuesday.

The Loonie is drawing support from moderate US Dollar weakness, after the influential New York Federal Reserve (Fed) President John Williams affirmed in a  Bloomberg interview that he sees no need to hike borrowing costs higher in 2027. These comments contrast with the market expectations of at least two interest rate hikes next year and have put some pressure on the Greenback.

The highlight on Wednesday is the US Consumer Price Index (CPI) report for September, which is expected to confirm that price pressures remain elevated amid the energy shock from the Middle East conflict. Later on the day, the Fed Vice Chairman of Supervision, Michelle Bowman, is due to speak and might shed some more light on the bank’s near-term monetary policy path.

Oil Prices buoy the Canadian Dollar

Meanwhile, Crude Prices keep trading higher, with the barrel of Brent crude trading a few cents below $105.00, providing support for the CAD, as Oil is Canada’s main export.

Missiles allegedly launched by the Iran-backed Houthi militias hit Saudi Aramco’s central offices in the Eastern city of Dhahran on Tuesday. These attacks follow a deadly strike on the King Khalid International Airport and an Oil refinery in Riyadh over the weekend, and boost fears of another contraction in Oil supply if the Iran war spills over into Gulf countries.

Beyond that, Iran announced a new strategy to target vessels attempting to cross the key Strait of Hormuz in an attempt to keep fuel prices at high levels to undermine US voters’ confidence in President Donald Trump ahead of the midterm elections.

Federal Reserve (Fed) Vice Chair for Supervision Michelle Bowman said the central bank needs time to assess how financial markets and the US economy evolve following the latest interest rate hike before considering further policy action, according to Reuters.

Bowman signals cautious post-hike pause, keeping Dollar bulls watchful

Fed’s Bowman delivered a moderately hawkish message, with an FXS Speechtracker score of 6.2, slightly above the 5.9 historical average and signaling a tone that remains firm relative to the established baseline. The key remark that it will “take time to wait and see” how financial markets and the economy evolve after the last rate hike before any more action underscores a data-dependent pause rather than a clear pivot, which keeps expectations for further tightening alive but delayed. This stance suggests the Dollar may retain underlying support as markets price in a prolonged higher-for-longer rate environment, even if immediate hike odds are tempered.

The FXS Fed Sentiment Index fell by 1.42 points to 130.21, indicating a modest pullback in perceived hawkishness despite remaining well above the neutral 100 threshold. This configuration shows that, while the overall policy tone is still firmly in hawkish territory, the latest speech marks a slight softening in momentum, aligning with a cautious wait-and-see approach captured by the FXS Speechtracker.

Market reaction

The US Dollar (USD) shows little reaction to Bowman's comments, with the US Dollar Index (DXY) remaining broadly unchanged around 102.22 at the time of writing on Wednesday.

ING’s Frantisek Taborsky argues recent Central and Eastern European (CEE) FX and rates gains may not last. Czech inflation data show core rising to 3.1%, reinforcing expectations for a Czech National Bank (CNB) rate hike in November unless geopolitics improve. ING’s separate report warns of emerging inflation risks from energy and food, with higher global prices expected to pass through and undermine the region’s recent respite.

Inflation risks threaten CEE rally

"Market sentiment yesterday was mixed, reflecting a catch-up following Monday’s US close alongside natural gas prices hitting new highs. The latter, in particular, suggests that the CEE region cannot enjoy a respite for long."

"Yesterday’s inflation data from the Czech Republic confirmed a rise in core inflation from 3.0% to 3.1%. Although this is an increase of only one-tenth of a percentage point, it marks the highest figure since December 2023."

"More importantly, the underlying structure and accelerating momentum effectively cement the case for a CNB rate hike in November – barring a significant improvement in the geopolitical situation."

"Speaking of inflation, a new report we released yesterday discussed emerging inflationary risks for the CEE region stemming from energy and food prices."

"Until now, food prices have offset higher fuel costs in the region, keeping headline inflation in check. This dynamic is expected to shift in the coming months as we see a lagged pass-through of global prices into local inflation."

"While we saw a rally in FX and rates yesterday, we do not believe the rates rally is justified at this juncture, given the rising risk of higher inflation and the strong correlation observed recently between interest rates and energy prices. Consequently, we expect these gains to be short-lived."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

OCBC strategists Sim Moh Siong and Christopher Wong note the US Dollar (USD) has rallied on higher US Treasury yields, energy prices and a hawkish Federal Reserve (Fed) bias, but still lacks conditions for a decisive move beyond its recent range. Calmer bond markets and potentially contained US inflation could curb further hawkish repricing, leaving the USD supported but without a clear breakout path in the near term.

Dollar supported but capped for now

"To break higher or not? That remains the key question for the USD. The DXY has rallied more than 3% over the past five weeks as markets priced a more hawkish Fed path and rising US Treasury yields amplified concerns about European sovereign debt."

"Our base case remains that the USD should stay well supported. However, we do not yet see the conditions for a sustained breakout from its recent range. Treasury market conditions have become noticeably calmer, with some of the technical factors that amplified the earlier surge in yields appearing to fade. That could reduce an important source of support for further USD gains."

"While inflation remains above the Fed's 2% target and justifies a restrictive policy stance, the need for aggressive tightening is less compelling if inflation is being driven primarily by supply-side factors such as energy costs and AI-related investment rather than overheating demand."

"Today’s CPI report is therefore critical. If the data confirm that underlying inflation pressures remain contained, markets may further scale back expectations for additional Fed tightening, limiting the USD's upside."

"We continue to expect only one additional Fed hike by mid-2027, compared with market pricing that still implies roughly three hikes. Unless inflation surprises materially to the upside, that gap leaves limited room for further hawkish repricing and argues against a decisive USD breakout in the near term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)