The U.S. dollar edged higher on Thursday, supported by cautious sentiment ahead of the long-delayed release of U.S. consumer price inflation data.
The U.S. dollar edged higher on Thursday, supported by cautious sentiment ahead of the long-delayed release of U.S. consumer price inflation data. The data, postponed by an extended government shutdown now stretching into its 23rd day, is expected to be published on Friday and could shape expectations for the Federal Reserve’s next policy move. At the same time, renewed trade tensions between Washington and Beijing weighed on market confidence. Reports that the Trump administration is considering export curbs on a wide range of software-driven technologies including laptops and jet engines in response to China’s latest restrictions on rare earth exports injected new uncertainty into global markets.
Why It Matters
The dollar’s movement reflects investors’ growing unease amid an information vacuum caused by the government shutdown and shifting geopolitical signals. With limited official data releases, traders are clinging to the upcoming CPI report as a key indicator of the Fed’s policy path. Markets overwhelmingly expect the central bank to cut rates next week and again in December, underscoring a global turn toward monetary easing.
Meanwhile, the prospect of escalating U.S.-China trade frictions threatens to unsettle global supply chains just as inflationary pressures begin to cool in major economies. Yet the relatively muted response in safe-haven assets like gold, the yen, and the Swiss franc suggests traders see the tariff threats as strategic posturing rather than an imminent economic rupture.
In the United States, the Federal Reserve sits at the center of market attention, with traders pricing in a 97% chance of a quarter-point rate cut at the October 29 meeting. The Treasury Department’s delayed data releases, a result of the political deadlock in Washington, have further complicated the Fed’s decision-making. Japan, meanwhile, faces its own delicate balancing act.
The yen slipped to a one-week low against the dollar as markets awaited details of a major stimulus package from new Prime Minister Sanae Takaichi, who is widely seen as favoring aggressive fiscal and monetary easing. The Bank of Japan, meeting on October 30, is not expected to raise rates until at least December.
In Britain, stubborn inflation at 3.8% has kept sterling under pressure, intensifying speculation that the Bank of England could cut rates by year-end. Across Asia and Europe, central banks are watching closely, aware that another Fed cut could send ripples through global currency and bond markets.
What’s Next
With traders largely in a holding pattern, Friday’s U.S. CPI release could set the tone for global markets in the weeks ahead. A softer reading would reinforce expectations of back-to-back Fed cuts, further weakening Treasury yields and bolstering equity markets. Conversely, an unexpectedly strong inflation print could complicate the Fed’s easing path and inject short-term volatility into forex markets. In Japan, Prime Minister Takaichi’s upcoming stimulus plan expected to exceed last year’s $92 billion package may provide temporary support for domestic consumption but could also pressure the yen further. For now, global markets appear to be marking time, caught between a stagnant flow of economic data and the unpredictable politics of trade brinkmanship between the world’s two largest economies.
