US inflation slowed to 3.5%, strengthening expectations that price pressures are easing and prompting markets to reassess the Federal Reserve's policy outlook. The latest CPI data weighed on the US Dollar, supported gold and lowered Treasury yields.
Oil prices remained volatile on Thursday as renewed tensions in the Middle East continued to keep energy markets on edge. Brent crude traded around $77 per barrel, while West Texas Intermediate (WTI) hovered near $73, as investors weighed the risk of supply disruptions against hopes that the conflict would not spread further. Despite easing from the highs reached earlier this week, both benchmarks remain comfortably above the levels seen before the latest escalation, highlighting how geopolitical risks continue to underpin oil prices.
The US dollar climbed to its strongest level against the Japanese yen in nearly four decades on Monday, with USD/JPY rising above 162 as investors continued to favour the greenback amid widening interest rate differentials between the United States and Japan. The move follows last week's more hawkish Federal Reserve meeting, which reinforced expectations that US interest rates could remain higher for longer. At the same time, the Bank of Japan (BoJ) has maintained a far more accommodative policy stance, leaving the yen under continued pressure.
The US Dollar has strengthened as investors reassess expectations for Federal Reserve policy, pushing the US Dollar Index above the 101 mark and reinforcing the view that interest rates could remain elevated for longer. Following last week's Federal Reserve meeting, markets have become less confident that interest rates will be cut as quickly as previously anticipated, supporting both the US dollar and Treasury yields. The latest move highlights how shifts in monetary policy expectations continue to influence currency markets, particularly as investors adjust to the prospect of higher borrowing costs persisting well into next year.
The Federal Reserve left interest rates unchanged at its latest policy meeting, but markets focused less on the decision itself and more on what policymakers signalled about the future. While rates remained at 3.50%-3.75%, a more hawkish set of projections and changes to the policy statement suggested officials remain cautious about inflation risks. As a result, investors were forced to reassess expectations for the path of US interest rates through 2026. The shift in tone prompted moves across bonds, currencies and broader financial markets, highlighting how sensitive investors remain to changes in central bank guidance.
