Market Overview

The U.S. dollar remained near a two‑week high against major peers on Wednesday, with the Dollar Index edging up 0.1% to 102.302 in early European dealing, consolidating a robust 0.6% surge recorded on Tuesday.

Inflation Data and Fed Reaction

U.S. Consumer Price Index (CPI) data for October showed headline consumer prices rising 0.4% month‑on‑month, surpassing the consensus forecast of a 0.3% increase. The hotter‑than‑expected CPI effectively shattered expectations that the Federal Reserve could pause its tightening cycle. Fed Governor Christopher Waller publicly stated he would support a rate increase in December even if inflation temporarily cooled, and argued that policymakers should be prepared to consider a larger 50‑basis‑point hike should price pressures intensify. Dallas Fed President Lorie Logan echoed this hawkish tone, indicating that the central bank needs at least two additional quarter‑point hikes to bring inflation under control.

Market Pricing of Rate Hikes

Following the CPI release and the Fed officials’ comments, traders rapidly repriced the Fed’s year‑end trajectory. According to the CME FedWatch tool, the probability of a 25‑basis‑point rate increase at the December meeting rose to 91%, up from 84% on Monday, while the probability of a more aggressive 50‑basis‑point hike increased to 10%.

Currency Movements

The dollar’s yield advantage pressured other major currencies. The euro slipped 0.1% against the greenback, after a 0.5% decline on Tuesday, and remains vulnerable ahead of a suite of European macro data, including a preliminary reading of third‑quarter Eurozone GDP, UK GDP figures, and a series of speeches from European Central Bank policymakers led by President Christine Lagarde. The Australian dollar edged up 0.2% after having plunged nearly 1% to a seven‑month low in the previous session; it continues to grapple with the headwinds of soaring U.S. Treasury yields while relying on cheaper global oil prices to eventually improve the terms of trade for energy‑importing Asian economies. The Japanese yen hovered near a six‑week low, though no specific level was quoted.

Analyst Commentary

Capital.com senior market analyst Daniela Hathron noted, "The Asian session has shrugged off some of the concerns.. but the open in Europe is looking a little more fragile," reflecting the mixed sentiment across regions.