Stronger-than-expected September core inflation lifted the probability of a Fed hike at the October 28 meeting to 43.7%, according to CME FedWatch. The Dollar Index and Treasury yields rose, while equity futures and precious metals fell.
The probability of a Fed rate hike at the October 28 meeting surged from 22.1% a day earlier to 43.7% on Wednesday, according to CME FedWatch. A hold remains narrowly favored at 56.3%, and the week-ago hike probability stood at 17.7%.
The trigger was September's US inflation report. ActionForex says core CPI held at 0.3% month on month rather than easing to the expected 0.2%, while annual core inflation rose from 2.4% to 2.6% against forecasts of 2.5%.
Headline CPI climbs on gasoline
The headline Consumer Price Index advanced 3.7% in the 12 months through September, after rising 3.4% in August, Reuters reported. Gasoline prices soared 7.1% in September, according to the US Energy Information Administration data cited by Reuters.
However, ActionForex notes that firmer price pressures extended across goods and services, which made the report more concerning than an energy-driven headline increase alone.
Dollar and yields jump, equities and metals slip
The Dollar Index broke above 102.60 to reach 102.72, the 2-year Treasury yield jumped toward 4.94%, and the 10-year yield rebounded above 5.30%. ActionForex lists the next confirmation points at 102.77 in the Dollar Index, 4.960% in the 2-year yield and 5.365% in the 10-year yield.
Risk assets weakened as well. Nasdaq futures were down around 0.67%, S&P 500 futures down around 0.31% and Dow futures down around 0.18%. Gold fell around 1% and silver more than 2%.
ActionForex says the repricing suggests markets are no longer as confident that the Fed can afford to pause tightening.
Sources: ActionForex, Investing.com (Reuters)
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