At 15:58 GMT, DXY is trading 98.939, up 0.347 or +0.35%.
With the Federal Reserve’s next policy decision just days away, markets are focused on Friday’s CPI inflation report, expected to offer the final material data input before the central bank convenes.
Expectations are for prices to rise at a slower pace than in August, which may reinforce the Fed’s pivot toward labor market conditions and potential rate cuts. However, any inflation surprise to the upside could shift expectations, reinforcing a hawkish bias.
Shutdown Nears Resolution as Treasury Yields Ease
Treasury yields fell across the curve on Tuesday, with the 10-year yield dipping below the psychologically significant 4% mark to settle at 3.955%. The decline followed growing optimism around a potential resolution to the U.S. government shutdown. White House economic adviser Kevin Hassett stated that a deal could materialize “very quickly” this week, with the administration prepared to escalate pressure if necessary.
Bond traders also reacted to the deepening economic data blackout, which has stalled key releases except for the CPI. The softening yields, particularly in the short end of the curve, underscore expectations that the Fed may soon pause or even begin easing if labor data continues to weaken and inflation decelerates.
Takaichi’s Win Pressures Yen, Supports Broader Dollar Strength
In currency markets, the Japanese yen weakened sharply after hardline conservative Sanae Takaichi secured election as Japan’s next prime minister. While her expected fiscal stimulus bolstered market sentiment, the prospect of a delayed monetary tightening cycle left the yen vulnerable.
