The dollar index (DXY00) rallied to a 1.5-year high on Wednesday and finished up by +0.37%. The dollar advanced on Wednesday on the stronger-than-expected US Sep CPI report, which bolsters speculation that the Fed will keep interest rates higher for longer. The CPI report boosted the chance of a Fed rate hike at this month’s FOMC meeting to 34% from 22% before the report. Also, Wednesday’s +1% rise in WTI crude oil boosted inflation expectations and could push the Fed to keep tightening monetary policy, supporting the dollar. In addition, Wednesday’s Fed Beige Book warned of intensifying price pressures that are hawkish for Fed policy and bullish for the dollar.
Comments on Wednesday from Fed Vice Chair Michelle Bowman signaled she favors keeping Fed policy steady at this month's FOMC meeting and were negative for the dollar when she said, "We have some time to wait and see how financial conditions and the economy evolve before we decide that we need to take any more action" on interest rates.
