The dollar retreated on Thursday from a 18-month peak in volatile trading. The reason was a sharp drop in US Treasury yields, which weakened the position of the American currency.
The dollar index fell by 0,2% to 102,03. The day before, after the release of hotter inflation data, it had reached a one-and-a-half-year high.
The euro recovered by 0,5% from a 18-month low and rose to 1,1216 dollars. This could be its strongest daily gain in nearly two months.
Despite the hot CPI figures, cautious comments from Fed officials cooled expectations of a rate hike in October. Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly said the regulator should wait for a clearer picture before the 27–28 October meeting.
Markets reacted quickly: the probability of a rate hike in October, which had jumped to 50% after the CPI, fell again. "Despite the fact that the CPI came in slightly stronger than expected, markets seem to have decided that it is not hot enough to force the Fed to act in October," noted ANZ Head of Asia Research Khoon Goh.
He added that the October meeting takes place just a few days before the midterm elections. The next reference points are the PPI and retail sales data, which will be released later on Thursday.
How will the upcoming statistics and Fed decisions affect the dollar's exchange rate?
