Key Points
- The dollar held steady in Asian trade Tuesday after sharp swings in recent sessions.
- Markets expect US annual inflation at 3.9% for October, with core near 2.8%.
- A hotter reading would harden December rate-hike bets and lift the dollar further.
The latest:
The dollar steadied in Asian trading on Tuesday, November 10, after a volatile stretch driven by falling oil prices and a rebound in global equities. Traders are waiting on October US consumer price data that could entrench bets on another rate increase next month, Reuters reported. Futures now price an 85% chance the Federal Reserve lifts rates in December.
Details:
- The inflation call: Economists polled by Reuters expect annual US consumer price inflation to climb to 3.9% in October, with core inflation — stripping out volatile food and energy — at about 2.8%. A reading above forecast would push investors to add to bets on further monetary tightening.
- The jobs trigger: Friday’s employment report showed US hiring came in at more than double analysts’ forecasts, according to Reuters. That surprise revived concerns about persistent price pressures and reversed the dollar’s slide, after cheaper oil and stronger stocks had pulled investors back toward riskier assets.
- The repricing: Market-implied odds of a Federal Reserve hike next month rose to 85% after the jobs data — a sharp turn from the start of the year, when investors were positioned for rapid cuts in borrowing costs.
- The energy shock: Reuters attributed part of the shift to the fallout from the US-Israeli war on Iran, which raised energy costs and fed inflationary pressure, forcing investors to rethink the expected path of US monetary policy.
- Risk currencies: The Australian dollar gained about 1% on Monday before settling at 0.6921 in early Asian trade. The New Zealand dollar posted larger gains at 0.5624, while the euro rose 0.7% to 1.1220, erasing losses incurred Friday after the US payrolls release.
- Sterling and yen: The pound held at 1.3441 after the Bank of England raised rates last week for the first time in three years. The yen traded near 157.97, the best G10 performer against the dollar over the past six months, supported by Japanese authorities’ interventions in the currency market.
- The AI risk: Markets still lean toward two US rate increases by mid-2027, but those expectations have eased amid turbulence in AI stocks and fears of tighter regulatory oversight after Democrats won control of Congress, Reuters said.
- The analyst view: Macquarie analysts Thierry Wizman and Gareth Berry judged that the developments could slow US growth through 2027 and help the dollar reach its peak, in a research note cited by Reuters. Investors fear new restrictions would slow AI infrastructure investment, a key growth engine.
Between the lines:
The dollar faces two opposing forces at once. Sticky inflation and an 85% hike probability support it in the short term, while higher borrowing costs and a possible slowdown in technology investment could cap its gains later. The October print therefore tests more than direction — it tests how much additional tightening the US economy can absorb while doubts grow over the durability of the AI investment boom.
What’s next
October US consumer price data is the immediate trigger: a hotter print strengthens December hike bets and the dollar, while a softer one would ease tightening expectations and let rival currencies recover ground.
