Forex Today 14/10: US CPI Due Today As Dollar Retreats

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Today's US CPI release is the main event for financial markets. September headline inflation is expected to rise by 0.6% month-on-month, lifting the annual rate from 3.4% to 3.6%, largely because of higher energy prices. Core CPI is expected to increase by a more moderate 0.2% monthly. The release is due at 12:30 GMT. A stronger core reading could revive expectations of an October Fed hike; an in-line or softer result would favour another hold.

Fed remarks have helped the Dollar retreat. New York Fed President John Williams said yesterday that he still expects one more rate increase this year but sees no need for further hikes in 2027. Markets are pricing approximately a 79% probability that the Fed will leave rates unchanged at its 27–28 October meeting. The message is therefore not that tightening is finished, but that its remaining scope may be more limited than previously feared, with the CME FedWatch tool showing an 89% chance of a 0.25% hike in December.

In the Forex market, the US Dollar is weakening after reaching an 18-month high. The Dollar Index fell 0.35% yesterday and is near 101.80 this morning. EUR/USD has recovered towards 1.1200 after reaching its new 17-month low around 1.1150 earlier this week. The longer-term bearish trend in the pair remains intact, but a sustained recovery above 1.1250 would make an immediate continuation lower less convincing.

US stocks edged lower yesterday rather than extending their earlier rally. The S&P 500 slipped 0.02% to 7,805.45, while the Nasdaq Composite lost 0.15% to 27,204.38 and the Dow Jones Industrial Average fell 0.35%. The S&P 500 and Nasdaq-100 both recorded a second consecutive losing session. These are modest declines, but neither index has confirmed a fresh record breakout. The S&P 500 Index is advancing again, but many analysts are noting that the equal weighted S&P 500 Index recently reached correction territory - a 10% decline from its recent peak, suggesting the broader stock market is eclipsed by a few mega-caps.

Asian technology shares are recovering today. South Korea's KOSPI has risen approximately 1.8%, Japan's Nikkei 225 is up around 0.2%, and the broad Asia-Pacific index excluding Japan has gained about 0.5%. The rebound offers some relief after the chip-stock selloff, although traders remain cautious ahead of US inflation data.

WTI continues to rise after the crucial $87.68 support has continued to hold. WTI is trading near $95 after breaking above a short-term descending trend line, while Brent is around $108.00. Renewed Houthi attacks on Saudi Arabia and threats to Persian Gulf shipping have increased supply concerns. The rebound is now substantially stronger than the tentative bounce seen last week.

Higher oil prices remain the main inflation complication. Crude's renewed advance threatens to offset some of the reassuring signals from softer employment and underlying inflation data. Today's CPI report covers September, so it will not capture all the effects of the latest October oil-price rise. Traders should therefore distinguish a reassuring historical core reading from the forward-looking risk posed by energy costs.

Bitcoin is holding above $83,000 but has not made a fresh breakout. It is trading near $83,750 after recovering from yesterday's early weakness. The $82,000 area remains the nearby technical level to watch, while the previously identified resistance around $87,293 is still unbroken. The consolidation remains viable, but stronger follow-through is needed before calling it decisively bullish.

Ethereum remains technically weaker than Bitcoin. Ether is near $2,516, still below the previously identified $2,544 support level. A sustained recovery above that area would improve the immediate picture; until then, the former bullish setup towards $2,800 remains less convincing.

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