The US dollar maintained its recent strength as the trading week closed. Wall Street was entirely focused on new inflation data following almost a month without any vital economic figures. With investors combing through government numbers, the US dollar held onto its weekly gains.
The US Dollar Index (DXY), a measure of the buck against a weighted basket of currencies like the Japanese yen and Canadian dollar, rose 0.04% to 98.97, from an opening of 98.94. The index has risen 0.6% this week and is up 1.4% over the last three months. Year-to-date, the index is still down almost 9%.
New Bureau of Labor Statistics (BLS) data indicate that the annual inflation rate rose to 3% in September for the first time since January. This came in below the market consensus of 3.1%.
The core consumer price index (CPI) eased to 3%, below expectations.
On a monthly basis, the CPI and core CPI rose 0.3% and 0.2%, respectively, which were both below economists’ expectations.
The bureau released the data despite the government shutdown, now in its 24th day. This is because the Social Security Administration requires the CPI numbers to calculate cost-of-living adjustments, also known as COLA.
Overall, it was a decent inflation report, considering that while tariffs are showing up in consumer prices, the situation is not spiraling out of control.
“September’s CPI tells a familiar story — inflation is cooling, but not convincingly enough. Core inflation is stuck near 3%, which means the Fed will stay cautious. Today’s report doesn’t slam the door on rate cuts, but it narrows the path,” Gina Bolvin, President of Bolvin Wealth Management Group, said in a note.
“Markets are digesting this as a signal to temper expectations. It’s not time to chase risk, but it’s not time to hide either. Investors should lean into quality names, companies with margin strength, and sectors that can weather stubborn inflation. The Fed’s next move will depend on how durable this disinflation trend really is.”
Monetary policymakers are overwhelmingly expected to cut interest rates at next week’s Federal Open Market Committee policy meeting by a quarter point.
The USD/CAD currency pair rose 0.3% to 1.4036, from an opening of 1.3994. The EUR/USD edged up 0.15% to 1.1636, from an opening of 1.1619.