FX Daily · Thursday, 15 October 2026
Dollar: CPI proposes, the Fed disposes
By Walid Qairmi, Macro Edge, written by AI · data as of 08:11 CEST
September's US CPI gave the dollar a reason to rise, then the Fed took away its momentum: the probability of a rate hike on 28 October rose from 22.1% to 43.7% after the release, before easing back towards 33% by the end of the day as Williams and other Fed members played down the urgency, a line echoed by Daly overnight. The 2-year closed at 4.82% (+3 bp) and the 10-year at 5.19% (-2 bp), well off their intraday peaks: the inflation shock did not hold until the close. Overnight, the slide in AI-linked stocks in Asia (Nikkei around -5%) benefited Treasuries and the yen rather than the dollar, while Australian employment (-39.3k) weighed on the AUD. Strong retail sales at 14:30 could turn the floor set by the CPI into a springboard. Until then, our bias remains neutral on the USD, bearish on the EUR and the AUD, and bullish on the JPY.
What moved the market
Inflation heats up, the Fed refuses to run
The facts
On Wednesday at 14:30 (Paris time), the BLS published a September CPI up 0.6% on the month and 3.7% on the year, against 3.6% expected and 3.4% in August. Core rose 0.3% on the month, against 0.2% expected, and 2.6% on the year. Petrol (+9.1% on the month, +34.2% on the year) accounts for more than half of the monthly rise in the headline, but housing still advanced 0.4%. In the wake of the release, John Williams (New York Fed) judged one further hike appropriate this year and none in 2027, and Mary Daly (San Francisco) said overnight that further hikes were more likely than not, with no urgency for October. These remarks reach us via the press, without a primary Fed text.
The market
According to CME FedWatch, the probability of a hike on 28 October rose from 22.1% to 43.7% after the figure, before falling back towards 33% later in the day; the exact level at our cut-off time is not verified. The 2-year gained as much as 12 bp intraday before closing at 4.82% (+3 bp), and the 10-year, after moving above 5.3%, ended at 5.19% (-2 bp). According to the press, EUR/USD hit a 17-month low just above 1.1100 before recovering about half of its decline; the ECB fixing of 1.1195 used in our dashboard was taken before the release. On Wall Street, the S&P 500 fell 1.1% and the Nasdaq 1.9%.
Our reading
Our reading is that the US front end is reacting more to the Fed's voice than to the data themselves. The CPI provided a floor for the dollar, since pricing of a hike by December already exceeded 89% before the figure, but FOMC members set a ceiling by refusing to endorse urgency for October. TD Securities judges 50/50 pricing for October reasonable, with the data and the Fed sending two opposing signals. Kevin Warsh's speech on Friday, the last before the blackout period, should settle this disagreement ahead of the FOMC on 27 and 28 October.
% year on year (l.), % year on year (r.)
Sources : BLS (CPIAUCSL, CPILFESL), Macro Edge Terminal (OFFI panel) 01/09/2026.
points (l.), % (r.)
Sources : ECB (Macro Edge calculation), US Treasury (DGS2), Macro Edge Terminal (2A-FF panel) 14/10/2026.
Headline CPI and Core CPI. The headline at 3.72% and core at 2.57% rose together in September. Inflation driven by petrol alone would not have moved core, and the accounts still pricing a hike in October rely on this point.
DXY and US 2-year. The dollar and the 2-year have advanced in tandem since September, but neither has revisited its highs after the CPI. The correlation of daily changes remains weak (0.11): the dollar follows the trend of the front end more than its day-to-day swings.
The AI shock benefits the yen, not the dollar
The facts
The fall in the Nasdaq (-1.9%) spread to Asia: the Nikkei 225 lost around 5%, dragged down by SoftBank, Advantest and Tokyo Electron, and the Kospi shed as much as 8%, triggering a suspension on the Kosdaq. TSMC's record results (quarterly profit up 69%) did not halt the move. Junko Koeda, a member of the BoJ board, said the central bank should not be overly cautious about raising rates. On oil, Washington is considering easing sanctions on the shadow fleet to relieve freight, and Brent was trading at $104.67 this morning (-1.31%); our EIA reading of $120.03 dates from 2 October and no longer reflects the market.
The market
Treasuries rallied overnight, the dollar fell back and gold gained around forty dollars. USD/JPY returned towards 157.60-157.93 according to secondary sources, a one-week low, against 158.45 at Wednesday's fixing.
Our reading
Our reading is that the dollar is not acting as a safe haven in this risk-off move because the shock comes from technology stocks and from a Fed perceived as more hawkish, two factors specific to the United States. The yen is drawing on several supports: lower US yields, a retreating oil price for an energy importer and a BoJ with a board member toughening the tone. This reading holds as long as the fall in equities comes with a fall in US yields; a risk-off move accompanied by rising yields would hand the advantage back to the dollar.
Australian employment halts the RBA's momentum
The facts
At 02:30 (Paris time), the ABS reported a fall in employment of 39,300 in September, against an expected rise of about 20,000 and a prior figure revised to +29,300. Unemployment rose to 4.7%, against 4.6% expected, its highest in five years. Full-time employment nevertheless rose by 34,400: the contraction is in part-time work, and participation remains at 66.8%.
The market
Traders scaled back their bets on a further RBA hike and the AUD fell back overnight. Wednesday's fixing (0.7010, +0.45%) predates the release and does not reflect this move.
Our reading
The composition of the figure is less bad than the headline, but unemployment at a five-year high is enough to push the RBA away from a quick hike. Combined with the slump in Asian equities, to which the AUD remains the most exposed major, this release strips the currency of its main rate support.
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Pricing gap
Each camp relies on one half of the picture. Inflation driven by energy and not passed through to wages resembles a supply shock, which the Fed can choose to look through; as long as it says so, rates accounts cannot price in more, and the dollar stays range-bound despite hot figures.
The narrative
Before the CPI, the market was pricing an 89.4% probability of at least one Fed hike by December and, according to ING, three hikes by June 2027. According to ING, the FOMC median projects fewer, and Williams sees only one more this year and none in 2027.
The data
The inflation data support the market: core CPI back up to 2.57%, core PCE at 3.01% in August, headline CPI at 3.72%. The labour data support the Fed: hourly earnings at 3.02% year on year, the lowest in the series, 29,000 jobs created in September and unemployment at 4.2%.
What closes it
Warsh's speech on Friday, then the 28 October FOMC. A Warsh who endorses urgency would align the Fed with the market and reopen the dollar's rise; a Warsh who follows Williams' line would force the market to price out 2027 hikes, to the dollar's detriment.
% year on year (l.), % (r.)
Sources : BEA (PCEPILFE), US Treasury (DGS2), Macro Edge Terminal (IMPLIED panel) 01/08/2026.
% year on year (l.), % year on year (r.)
Sources : BLS (CES0500000003, CPILFESL), Macro Edge Terminal (CLAIMS panel) 01/09/2026.
Core PCE and US 2-year. Core PCE, the measure the Fed targets, rose back to 3.01% in August, and the average 2-year yield jumped from 4.34% in August to 4.88% in September. Traders have aligned the front end with a benchmark inflation rate that is no longer converging towards 2%.
Average hourly earnings and Core CPI. Average hourly earnings slowed to 3.02% year on year, the slowest pace in the series shown, while core CPI is rising. The FOMC members who see only one more hike rely on this absence of a wage spiral.
Currency by currency
The biases taking shape
EUR · The French premium adds to the rate differential
EUR/USD has lost 3.6% over thirty sessions, from 1.1615 on 3 September to 1.1195 at Wednesday's fixing, and a secondary source puts it around 1.12 this morning after an intraday low just above 1.1100. Over the same period, EUR/GBP fell from 0.8606 to 0.8438: the euro is also falling against a European currency, which points to a factor specific to the euro area. The 10-year OAT-Bund spread reached 139.5 bp on 12 October, its widest since 2011, while the National Assembly examines the Lecornu budget.
At the ECB, the deposit rate stands at 2.50% after the June and September hikes, but traders have priced out the October hike: around an 87% probability of no change on 29 October as of 12 October, against nearly a 60% probability of a hike on 24 September. Lagarde struck a dovish tone in early October, while Wunsch said on Wednesday that further hikes might be needed; pricing after the US CPI is not verified. The 10-year spread with the United States, around 175 bp, also weighs on the euro.
ING sees a retest of 1.1150-1.1160 followed by a rebound towards 1.13 on a one-month horizon. We see no catalyst for a rebound before the ECB meeting on 29 October: Friday's final HICP (core expected at 2.5%) is unlikely to revive October pricing. The 17-month low, just above 1.1100, is the first marker below the market.
% (l.), % (r.)
Sources : US Treasury (DGS10), OECD (IRLTLT01DEM156N), Macro Edge Terminal (SPRDS panel) 01/10/2026.
The US 10-year (5.19%) stands roughly 175 bp above the Bund (around 3.46%). This yield gap still weighs on the euro, and the French risk premium adds to it.
- Bias
- Baissier · confidence average
- Invalidation
- A EUR/USD close above 1.1270 (the 6 October high) or a return of the OAT-Bund spread below 130 bp.
JPY · The yen absorbs the risk-off, Tokyo keeps 159 in its sights
USD/JPY closed at 158.85 on 24 September and at 158.60 on 12 October without breaking 159, a level Tokyo has been watching since the joint intervention with Washington on 31 July. Wednesday's fixing (158.45) predates the CPI; the pair was trading at 157.60-157.93 overnight according to secondary sources, in the wake of the fall in US yields and the slump in the Nikkei.
The BoJ raised its rate to 1.25% on 18 September. The market prices only about a 10% probability of a hike on 30 October, but nearly 88% by December according to FXStreet; Junko Koeda's remarks point towards a less patient BoJ. The 10-year Treasury-JGB spread has narrowed by about 120 bp in two and a half years without the pair following, which leaves the yen room to catch up if US yields fall.
Today the yen depends on US retail sales: a strong figure would lift the 2-year again and push the pair towards 158.5, while a weak figure would open the way to 157 and below.
% (l.), % (r.)
Sources : US Treasury (DGS10), OECD (IRLTLT01JPM156N), Macro Edge Terminal (SPRDS panel) 01/10/2026.
The 10-year JGB rose from 0.87% to 3.05% on a monthly average basis over the period shown, and the spread with Treasuries narrowed from about 345 bp to 225 bp. USD/JPY, near 158, has not followed this narrowing, which leaves the yen room to catch up.
- Bias
- Haussier · confidence faible
- Invalidation
- A USD/JPY close above 158.85, the closing high of 24 September, or a rebound in technology stocks accompanied by a rise in the US 10-year yield.
AUD · Unemployment at 4.7% strips the AUD of its rate support
Before the employment data, AUD/USD had regained ground, from 0.6939 on 2 October to 0.7010 at Wednesday's fixing (+0.45% on the session). The ABS figures (-39.3k, unemployment at 4.7%, a five-year high) pushed the currency lower overnight and reduced bets on an RBA hike; the exact pricing for November is not verified.
The rise in full-time employment (+34.4k) tempers the reading, but the AUD is also suffering from the slump in Asian equities and semiconductor-related stocks. A fall below 0.6939 would take the pair back to the low of the period shown.
- Bias
- Baissier · confidence average
- Invalidation
- A sustained return of AUD/USD above 0.7030, driven by a rebound in Asian technology stocks.
The scenarios
US September retail sales and PPI, 14:30. The jump in petrol prices mechanically inflates sales in value terms; the control group, which excludes petrol stations, will give a better read on whether demand is holding up.
| If | Then |
|---|---|
| Stronger than expected (sales at +0.6% or more, solid control group, core PPI above +0.3%) | Probability of a hike on 28/10 back towards 45-50% → US 2-year ↑ towards 4.90% → USD supported, EUR/USD towards 1.1150 then 1.1100 → Sensitive pairs: EUR/USD, AUD/USD, USD/JPY |
| In line (sales around +0.3%, core PPI at +0.3%) | Fed pricing stable at around one third for October → The market waits for Warsh on Friday → Dollar range-bound; the yen keeps the upper hand if equities remain under pressure |
| Weaker than expected (sales flat or down, negative control group) | Read as demand giving way to the petrol shock → US 2-year ↓ below 4.75% → USD weakened, USD/JPY towards 157 → Sensitive pairs: USD/JPY, EUR/USD |
Paris time
Today's agenda
| Time | Event | Consensus | Précédent | FX sensitivity |
|---|---|---|---|---|
| 14:30 | United States: September retail sales | +0.3% m/m; ex-autos +0.5% | +1.2% m/m (first estimate); ex-autos +1.4% | |
| 14:30 | United States: September producer prices (PPI) | +0.5% m/m, 5.3% y/y; core +0.3% m/m, 4.4% y/y | +0.4% m/m, 5.4% y/y | |
| 14:30 | United States: weekly jobless claims (week to 10/10) | 195-200k | 197k | |
| 14:30 | United States: October Philly Fed index | n/a | n/a |
Invalidation
What would change ourmind
Our reading of a range-bound dollar, supported by the data but capped by the Fed, would be called into question by:
- Strong retail sales that push the 2-year above 4.92%, its 28 September peak: the ceiling would give way and EUR/USD would fall below 1.1100.
- A Warsh who, on Friday, judges an October hike necessary, which would take the FedWatch probability back above 50%.
- Conversely, falling retail sales and a 2-year below 4.75%: the floor would give way, with the dollar index below 101.8, its 6 October level.
- A risk-off move that spreads to US yields on the upside: the dollar would become a safe haven again and our bullish bias on the yen would no longer hold.
In short
What you need pick
The dollar is moving in a corridor: energy inflation gives it a floor, and a Fed that refuses urgency imposes a ceiling. The inflation data are hawkish, the Fed's voices dovish, and for now the front end is leaning towards the Fed. The main risk is a sequence of strong retail sales followed by a hawkish Warsh on Friday, which would break the ceiling and send EUR/USD below 1.1100. Next test: retail sales and PPI at 14:30.
Taken at 08:26, Paris time
The markets in numbers
| Price | 1 session | 1 month | Since 31/12 | |
|---|---|---|---|---|
| Currencies | ||||
| EUR/USD | 1.1195 | +0.06% | −3.08% | −4.72% |
| USD/JPY | 158.45 | +0.21% | +2.53% | +1.14% |
| GBP/USD | 1.3267 | +0.15% | −1.69% | −1.48% |
| USD/CHF | 0.8334 | +0.13% | +2.08% | +5.14% |
| USD/CAD | 1.4219 | −0.16% | +2.39% | +3.85% |
| AUD/USD | 0.7010 | +0.45% | −1.68% | +4.88% |
| NZD/USD | 0.5614 | +0.01% | −2.74% | −2.63% |
| EUR/GBP | 0.8439 | −0.09% | −1.42% | −3.29% |
| Dollar index (Macro Edge calculation) | 102.23 | −0.04% | +2.76% | +4.05% |
| Rate | ||||
| US 2-year | 4.82 % | +3 bp | +17 bp | +135 bp |
| US 10-year | 5.19 % | −2 bp | +22 bp | +101 bp |
| Commodities | ||||
| Brent | 120.03 | +2.52% | +33.77% | +89.89% |
| WTI | 98.07 | +4.81% | +15.89% | +69.06% |
| Gold (monthly average) | 4,335 | n/a | −1.92% | +0.48% |
Changes in % for prices, in basis points for rates. Each line carries the date of its latest official release: ECB reference rates (around 4 pm the day before), US Treasury, EIA (spot prices, a few days' lag), IMF for metals (monthly averages). The dollar index is calculated by Macro Edge from ECB rates, using the historical index weights. Official sources, via the Macro Edge Terminal.
Sources
- 1. U.S. Bureau of Labor Statistics, Consumer Price Index – September 2026, 2026-10-14.
- 2. Australian Bureau of Statistics, Labour Force, Australia, September 2026, 2026-10-15.
- 3. Federal Reserve, October 2026 calendar, 2026-10.
- 4. ONS, UK labour market: October 2026 (release calendar), 2026-10-20.
- 5. Investing.com, Fed October Hike Odds Hit 45% as 2-Year Treasury Yield Rises 12 Bps, 2026-10-14.
- 6. Blockonomi, October Fed rate hike odds surge to 43% as U.S. CPI inflation hits 3.7%, 2026-10-14.
- 7. KuCoin News (citing TD Securities), U.S. Treasury yields rise then fall after CPI data, 2026-10-14.
- 8. FXStreet, Euro breaks to a 17-month low as US core inflation beats forecasts, 2026-10-14.
- 9. FXStreet, Forex Today: US Dollar weakens ahead of US CPI inflation data, 2026-10-14.
- 10. FXStreet, French risk spreads from OATs into the euro as Assembly takes up the budget, 2026-10-13.
- 11. FXStreet, ECB October hike looks unlikely: Lagarde strikes a surprisingly dovish tone, 2026-10-08.
- 12. ideal-investisseur.fr, OAT-Bund spread, 2026-10-12.
- 13. AP / ABC News, How major US stock indexes fared Wednesday 10/14/2026, 2026-10-14.
- 14. investingLive, Asia-Pacific market news: Treasury rally sinks dollar, lifts gold, 2026-10-15.
- 15. investingLive, Australian September 2026 unemployment rate 4.7%, 2026-10-15.
- 16. The Japan Times, Nikkei decline, 2026-10-15.
- 17. CNBC, Oil prices today: Brent, WTI, 2026-10-15.
- 18. Oilprice.com, Oil Prices Fall as Trump Considers Easing Sanctions on Shadow Fleet Tankers, 2026-10-15.
- 19. Admiral Markets, US retail sales September 2026 preview, 2026-10.
- 20. Admiral Markets, US initial jobless claims forecast, 15 October 2026, 2026-10.
- 21. ING THINK (counterpoint), FX Daily: Hot inflation to strengthen dollar floor, 2026-10-14.
This publication is provided for information purposes only and is neither investment advice nor a recommendation to buy or sell any financial instrument. Written with the help of artificial intelligence (Claude, Anthropic) and published under the editorial responsibility of Walid Qairmi, publication director of Macro Edge. Figures are facts, sourced and dated; biases and scenarios are the author's opinions as of the publication date and may change without notice. The author is a student and keeps learning every day. Conflicts of interest: the author may personally take positions on some of the ideas presented; Macro Edge receives no compensation from any broker, issuer or third party for this publication.
