Sample Category Title

Daily Pivots: (S1) 0.7934; (P) 0.7958; (R1) 0.7999; More….

Intraday bias in USD/CHF is turned neutral with current retreat. But risk will stay on the downside as long as 0.8071 resistance holds. Below 0.7914 will bring retest of 0.7871 low. Firm break there will resume larger down trend. Next target is 61.8% projection of 0.8475 to 0.7871 from 0.8170 at 0.7797.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8475 resistance holds.

Daily Pivots: (S1) 1.3805; (P) 1.3833; (R1) 1.3871; More...

Intraday bias in USD/CAD remains neutral for the moment. On the upside, firm break of 1.3923 resistance will resume whole corrective rebound from 1.3538. However, sustained break of 1.3725 will argue that the rebound has completed at 1.3923, and turn near term outlook bearish.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 1.4017) holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.

Daily Pivots: (S1) 0.6570; (P) 0.6595; (R1) 0.6610; More...

AUD/USD retreated ahead of 0.6624 resistance and intraday bias is turned neutral first. Some consolidations could be seen but further rally is expected as long as 0.6559 resistance turned support holds. On the upside, firm break of 0.6624 will resume larger rally from 0.5913 to 0.6713 fibonacci level. However, sustained break of 0.6559 will turn bias to the downside and extend the corrective pattern from 0.6624 with another falling leg.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).

Dollar sellers paused, with the greenback holding just above recent lows as traders took profits ahead of two crucial U.S. inflation reports. Momentum stalled as markets awaited fresh catalysts in the form of PPI today and CPI on Thursday. Any signs of hotter-than-expected price growth may revive fears of stagflation, complicating the Fed’s task as it weighs cutting rates to stabilize the weakening labor market. On the other hand, if tariffs prove less inflationary than feared, bets on faster easing would quickly intensify.

Fed independence remains a parallel concern after a federal judge blocked US President Donald Trump’s attempt to remove Governor Lisa Cook. The ruling held that the law’s “for cause” provision cannot be used to remove a governor for pre-office conduct. The case, expected to reach the Supreme Court, could set a major precedent on the limits of presidential authority.

Cook has denied any wrongdoing in relation to Trump’s allegations of mortgage fraud. Judge Jia Cobb stressed that the public interest lies in protecting the Fed’s independence, a principle markets view as crucial for maintaining credibility in tackling inflation.

On the trade front, Trump asked the EU to impose tariffs of up to 100% on China and India over their Russian oil purchases, pledging that Washington would mirror any such measures. The U.S. already lifted tariffs on Indian imports to as high as 50%, prompting protests from New Delhi. China, the biggest buyer of Russian oil, has so far been spared after agreeing to a tariff truce with Washington.

Meanwhile in Europe, French President Emmanuel Macron appointed loyalist Sebastien Lecornu as Prime Minister, signaling continuity on his pro-business reform agenda. Lecornu, 39, will lead another minority government, tasked with finding compromises across parliament as France grapples with debt concerns and political fatigue.

For the week so far, Loonie is the weakest performer, with Euro and Yen not far behind. On the stronger side, Kiwi leads, followed by Aussie and Sterling, reflecting a modest risk-on backdrop. Dollar and Swiss Franc sit in the middle.

In Asia, Nikkei rose 0.84%. Hong Kong HSI is up 1.29%. China Shanghai SSE is up 0.34%. Singapore Strait Times rose 1.07%. Japan 10-year JGB yield rose 0.002 to 1.567. Overnight, DOW rose 0.43%. S&P 500 rose 0.27%. NASDAQ rose 0.37%. 10-year yield rose 0.028 to 4.074.

China CPI falls -0.4% yoy, core inflation hits 2-1/2 year high

China’s consumer prices slipped deeper into deflation in August, with CPI down -0.4% yoy after July’s flat reading, worse than expectations of -0.2% yoy and the weakest in six months. Food prices were the main drag, falling -4.3% yoy versus -1.6% yoy previously. On a monthly basis, CPI was unchanged, undershooting forecasts for a small 0.1% mom rise.

At the same time, core inflation showed signs of life, rising 0.9% yoy in August compared with 0.8% yoy in July — the fastest pace in two and a half years. The pickup suggests underlying demand in services and other non-food sectors is holding up better than headline numbers imply, even as consumers face falling food costs.

Producer prices continued to contract, though at a slower pace. PPI dropped -2.9% yoy, in line with expectations and an improvement from -3.6% yoy in July. The figures highlight China’s ongoing struggle with persistent factory-gate deflation, which has now lasted nearly three years.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6570; (P) 0.6595; (R1) 0.6610; More...

AUD/USD retreated ahead of 0.6624 resistance and intraday bias is turned neutral first. Some consolidations could be seen but further rally is expected as long as 0.6559 resistance turned support holds. On the upside, firm break of 0.6624 will resume larger rally from 0.5913 to 0.6713 fibonacci level. However, sustained break of 0.6559 will turn bias to the downside and extend the corrective pattern from 0.6624 with another falling leg.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).

Since a retest on its key medium-term “Expanding Wedge” range support on 22 August 2025, the AUD/USD has staged a minor bullish reversal and rallied by 3.2% (low to high) to print an intraday high of 0.6620 on Tuesday, 9 September 2025, on the backdrop of a broad-based weaker US dollar against other major currencies in anticipation of a Fed dovish pivot.

Fig. 1: One-day rolling performances of the US dollar against major currencies as of 10 Sep 2025 (Source: TradingView)

In today’s Asia session, on 10 September, the Australian dollar is the strongest-performing currency among the majors against the US dollar. Based on a one-day rolling performance, the USD/AUD cross rate has declined by -0.3%, much more than the US Dollar Index, which is trading almost unchanged (see Fig. 1).

The current upswing in AUD/USD has been reinforced by easing concerns over a potential deflationary spiral in China from the latest key inflationary trends data for August.
China’s core CPI has swung up further into growth territory

China inflation trend with AUD/USD

Fig. 2: China CPI and core CPI with AUD/USD as of 10 Sep 2025 (Source: TradingView)

China is a key trading partner of Australia, where a higher consumer demand from China on Australia’s raw minerals products is likely to exert upside pressure on the Aussie dollar.

Despite the weaker-than-expected headline China’s consumer prices (CPI) that dropped to -0.4% y/y in August from a flat reading in July, and missing forecasts of a -0.2% y/y fall, the core CPI (excluding food and energy) has improved to a further positive reading of 0.9% y/y in August from 0.8% y/y in July,

Overall, the core CPI trend in China has trended higher over the past six months, since the February 2025 print of -0.1% year-over-year. Interestingly, the long-term movement (monthly chart) of the AUD/USD has a direct correlation with the trend of China’s core CPI (see Fig. 2).

China’s improving core CPI trend is likely to lift consumer confidence, which has remained subdued since the post-COVID period and the property market downturn. A recovery in sentiment could drive stronger demand for Australia’s raw minerals, creating a positive feedback loop that supports further strength in the Aussie dollar.

Let’s now decipher the short-term trajectory (1 to 3 days) of the AUD/USD and its key levels to watch from a technical analysis perspective.

Fig. 3: AUD/USD minor trend as of 10 Sep 2025 (Source: TradingView)

Fig. 4: AUD/USD medium-term trend as of 10 Sep 2025 (Source: TradingView)

Preferred trend bias (1-3 days)

Since its minor swing low of 0.6501 printed on 4 September 2025, AUD/USD is now undergoing a potential minor bullish acceleration phase after a retest of its 20-day moving average.

Bullish bias above 0.6580 key short-term pivotal support, and a clearance above 0.6620 sees the next intermediate resistances coming in at 0.6640 and 0.6660/0.6680 (also a Fibonacci extension cluster) (see Fig. 3).

Key elements

• Price actions of the AUD/USD have traded back above the 20-day and 50-day moving averages since last Friday, 5 September 2025, which reinforces a minor uptrend phase that is still in progress.
• The hourly RSI momentum indicator has managed to stage a rebound at its parallel ascending support, suggesting that the short-term bullish momentum condition remains intact.
• The AUD/USD is still evolving within a medium-term “Expanding Wedge” configuration since 22 April 2025, with the upper limit/resistance of the “Expanding Wedge” standing at 0.6660/0.6700 (also the long-term secular descending trendline from 25 February 2021 high) (see Fig. 4).

Alternative trend bias (1 to 3 days)

A break below 0.6580 key short-term support invalidates the bullish scenario on the AUD/USD to trigger off another round of minor corrective decline sequence to expose the next intermediate supports at 0.6550 and 0.6525.

Those who read these morning notes regularly know how surprising I was to see such strong and much better-than-expected NFP reports month after month at a time when mass layoffs, deportations and tariff-driven uncertainty were supposed to weaken the US jobs market. Well, it appears that I was right to be surprised, and that the numbers were not all that accurate.

The BLS announced yesterday that the payrolls report could be revised down by 911K jobs for the 12 months through March – about 76K fewer jobs per month. That would mark a record-high revision. In simpler words, it means that the US jobs market is in much worse shape than we thought. But it’s not the BLS’s fault. The BLS releases the jobs figures just days after the end of each month by extrapolating from a sample of data. In normal times, this works well and gives investors and economists an early and fairly accurate picture of the underlying jobs market. But in times of heavy disturbance – like we’ve had since the beginning of this year – the extrapolation works much less well, and the numbers now clearly show that the US economy is bearing the brunt of Donald Trump’s policies.

That means the Fed may indeed have fallen behind the curve – at least on the jobs front – while trying to anticipate tariff-led inflation. The latter could mean bigger and faster rate cuts in the coming months, depending on inflation. Today, the US will publish its latest PPI update for August. After last month’s circa one-percentage-point jump, headline PPI is expected to have steadied near 3.3%, and core PPI may have eased from 3.7% to 3.5% YoY. The real question is how much of the rising input costs will flow into the consumer price index – due tomorrow. The stronger the inflation figures, the slower the Federal Reserve (Fed) will lower interest rates – and that could demoralize investors who are currently happy to see the jobs market weaken in exchange for larger rate cuts.

As such, yesterday’s BLS revision didn’t boost appetite in US 2-year bonds, which best capture Fed expectations. The US 2-year yield rebounded to 3.55%, while the US dollar recovered – probably also on some safe-haven flows amid rising geopolitical tensions in the Middle East following Israel’s latest strikes in the region. Fed funds futures now give a 100% probability for at least a 25bp cut at next week’s FOMC meeting, and about an 8% chance for a 50bp cut. Stronger-than-expected inflation numbers this week could cement the case for a 25bp cut – which could lead to an upside correction in US short-term yields and the dollar, and weigh on equities. A softer set of figures would give more weight to the possibility of a 50bp cut, sending US short-term yields and the dollar lower, and equities higher.

The S&P 500 consolidated gains at ATH yesterday, as did the Nasdaq. Tech stocks were in demand, except for Apple – where the unveiling of its thinnest iPhone yet, but with no major AI news, sent the share price down 1.5% after the product reveal. A neocloud company called Nebius, on the other hand, jumped 50% after Microsoft announced a five-year agreement with the company, initially valued at $17.4 billion, with the option to scale up to around $19.4 billion depending on its compute needs. Jackpot! Another Microsoft neocloud provider, the Nvidia-backed CoreWeave, rose 7% as the deal confirmed how strong the demand for AI computing capacity is. Nvidia recovered 1.5%, while Broadcom – which has rallied on news of its cooperation with OpenAI to produce an AI chip to rival Nvidia – gave back 2.6%. Then, Oracle rocketed 28% in after-hours trading – yes, 28% – following its own massive deal with OpenAI and a jump in quarterly bookings. In summary, AI doesn’t know crisis.

Speaking of crisis: if you’re wondering how French markets behaved after another change in prime minister – the fifth in just two years – you’d be surprised to hear that the CAC 40 still eked out a 0.19% gain, despite a rebound in French 10-year yields. The DAX, in contrast, eased 0.37%. Yet, the spread between French and German 10-year yields spiked above 80bp, while the spread against the Italian 10-year collapsed to zero – for the first time since the early 2000s. Fitch is scheduled to deliver its review of France’s sovereign credit rating on Thursday. The current rating is AA- with a negative outlook. A confirmation with a negative outlook would signal caution, reinforcing market concerns, while a downgrade – due to prolonged political uncertainty – would be material, possibly triggering forced selling by institutional investors who must adhere to minimum credit thresholds. For the euro, the French political turmoil implies limited upside potential, and possibly a reversal of gains before reaching the 1.20 level. Also on Thursday, the European Central Bank (ECB) is expected to leave rates unchanged and repeat that its policy remains data-dependent.

In commodities, gold refreshed records – this time on safe-haven demand following escalating Middle East tensions – while crude oil remains bid on both the geopolitical backdrop and waning hopes in Ukraine. Nat gas futures also rebounded from a key Fibonacci support and could extend gains on fresh geopolitical concerns. The UK’s energy- and miner-heavy FTSE 100 continues to be supported by strong commodity demand. Yesterday’s mega-deal, in which Anglo American agreed to buy Canada’s Teck Resources for its copper mines, added to the momentum. It’s all about real and tangible assets, now that confidence in the most popular sovereign debt papers is crumbling.

In focus today

In the US, August producer prices (PPI) are due for release in the afternoon. This time, the PPI will attract even more attention than usual both because it is released ahead of the August CPI and because the previous July release surprised significantly to the upside. It will provide markets with the first sense of how tariff-related costs have continued to build.

In Norway, we expect the August inflation figures to show core inflation (CPI-ATE) rising by 2.8% y/y (cons: 3.1%) and declining -1.0% m/m (cons: 0.8%). This aligns with Norges Bank's June MPR estimate of 3.1% when we correct for the government's decision to cut kindergarten prices from 1 August. The price cut is expected to help pull down core inflation by approximately 0.2-0.3 percentage points.

In Sweden, we will receive economic data for July, including the production value index (PVI), industrial production, the consumption indicator, and the GDP indicator. In June, the PVI increased y/y, and industrial production has been strong. While the GDP indicator is volatile and should be interpreted cautiously, the consumption indicator is generally more reliable and has shown signs of improvement.

In Denmark, inflation data for August is also released. We expect inflation will fall to 2.0% y/y from 2.2% y/y in July. It is particularly driven by an August surge in electricity prices last year now exiting the inflation measure, while at the same time prices look to have declined in August this year. It will be interesting to see how big the usual August food price decline will be following three months of surging prices.

Economic and market news

What happened overnight

In China, August CPI inflation dropped back into negative territory at -0.4% y/y (prior: 0.0%), generating fresh deflation headlines. However, core inflation rose to 0.9% y/y (prior: 0.8%) and has been increasing over the past quarters, nearing 1%. PPI eased to -2.9% y/y (prior: -3.6%) but remains in deflation, reflecting ongoing overcapacity issues in certain sectors driven by intense competition and insufficient demand.

In the US, a federal judge ruled that President Trump's attempt to remove Fed Governor Lisa Cook lacks legal ground, temporarily keeping her in office as the case proceeds. This likely means that Cook can attend the Fed meeting on 16-17 September, reinforcing Fed's independence.

Also in the US, President Trump has urged the EU to impose tariffs of up to 100% on China and India to pressure Putin by targeting key buyers of Russian oil. The request came as the EU delegation met in Washington to discuss sanctions coordination. An EU diplomat stated the US signalled readiness to impose similar tariffs if the EU agreed.

What happened yesterday

In the US, the preliminary NFP benchmark revision came in more negative than expected with a significant downward adjustment of -911k jobs. However, note that the revision applies to employment data from April 2024 to March 2025 and, as such, does not reflect recent growth momentum in labour markets. The data shows no sharp rise in layoffs or unemployment, but slowing job growth reflects limited available workers. While the data alone does not strongly justify immediate rate cuts, it may serve as an argument for those already advocating for it. We expect the Fed to resume its rate cutting cycle starting at next week's September meeting.

In France, President Macron appointed defence minister Sebastien Lecornu as prime minister. A close ally of the president and the only minister to have remained in government since Macron's 2017 election. A tough challenge now awaits the new PM of helping the minority government secure opposition support to pass the 2026 budget.

In geopolitics, Israel launched an attack on Hamas in Qatar, drawing condemnation from Qatari officials, Arab leaders, and the UN. The White House stated that the strike did not advance Israeli or American goals but reaffirmed eliminating Hamas as a worthy objective. Israeli authorities have also threatened to expand their assault against the Houthis in Yemen, as the humanitarian situation in Gaza worsens. In our view, yesterday's attack seems more like an act to sabotage ongoing ceasefire talks, even as Israeli leadership is likely to frame it as a coercive measure to force a truce. Oil prices showed little reaction, reflecting a high threshold in markets for disruptions in the Middle East.

Equities: Equities extended their grind higher yesterday in what some would call a pain trade - an uncomfortable lift where investors remain uneasy about valuations and macro risks, yet the market keeps drifting up. Cyclicals outperformed defensives, volatility edged lower, and we saw a classic rally given where we are in the cycle and how positioning is. In the US yesterday, Dow +0.4%, S&P 500 +0.3%, Nasdaq +0.4% and Russell 2000 -0.6% and into the US close, the Dow, Nasdaq and S&P 500 all hit fresh all-time highs, underlining the strength of the move.

The wall of worries remains intact - from sharp downward revisions to US payrolls, to the French government losing a confidence vote, to geopolitical tensions following the Israeli strike in Qatar. Yet the market shrugged it off, as the underlying data flow yesterday was generally solid and the political/geopolitical noise did not fundamentally alter the economic outlook. This morning, Asian markets are higher and the same goes for most futures in the US and Europe.

FI and FX: For the first session in a week, global yields ended yesterday on a higher footing. Overnight this move has extended with 10Y US Treasury yields hitting 4.09%. The USD FX is also stronger with EUR/USD completing an almost full-figure drop down close to the 1.17-figure. In broader FX markets, commodity exporting currencies have enjoyed higher commodity prices with notably NOK and AUD being among the outperformers in Majors' space. On the other hand, commodity importing currencies have suffered with CEEs and the EUR doing poorly.

Key Highlights

• AUD/USD started a fresh rally from the 0.6500 region.
• A key bullish trend line is forming with support at 0.6540 on the 4-hour chart.
• Gold surged further to a new all-time high above $3,660.
• EUR/USD could aim for a move toward 1.1850 or even 1.1880.

AUD/USD Technical Analysis

The Aussie Dollar remained supported above 0.6500 and started a fresh increase against the US Dollar. AUD/USD rallied above 0.6550 and 0.6580 to enter a positive zone.

Looking at the 4-hour chart, the pair settled above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour). The pair even spiked above 0.6615 before it faced some resistance.

On the upside, the pair could face resistance near the 0.6620 level. The first major hurdle for the bulls could be 0.6640. A close above 0.6640 could set the pace for another increase. In the stated case, the pair could rise toward 0.6720, above which the bulls could aim for a move toward 0.6850.

Any more upsides could send the pair toward 0.6900. On the downside, immediate support is 0.6575. The next key area of interest might be 0.6550. There is also a major bullish trend line forming with support at 0.6540 on the same chart.

The trend line is close to the 61.8% Fib retracement level of the upward move from the 0.6501 swing low to the 0.6619 high. Any more losses could send the pair toward 0.6510 and the 100 simple moving average (red, 4-hour).

Looking at Gold, the bulls remain in action as they were able to push the price to a new all-time high above $3,660.

Upcoming Key Economic Events:

• US Producer Price Index for August 2025 (MoM) – Forecast +0.3%, versus +0.9% previous.
• US Producer Price Index for August 2025 (YoY) – Forecast +3.3%, versus +3.3% previous.
• US Wholesale Inventories for July 2025 (preliminary) – Forecast +0.2%, versus +0.2% previous.

China’s consumer prices slipped deeper into deflation in August, with CPI down -0.4% yoy after July’s flat reading, worse than expectations of -0.2% yoy and the weakest in six months. Food prices were the main drag, falling -4.3% yoy versus -1.6% yoy previously. On a monthly basis, CPI was unchanged, undershooting forecasts for a small 0.1% mom rise.

At the same time, core inflation showed signs of life, rising 0.9% yoy in August compared with 0.8% yoyin July — the fastest pace in two and a half years. The pickup suggests underlying demand in services and other non-food sectors is holding up better than headline numbers imply, even as consumers face falling food costs.

Producer prices continued to contract, though at a slower pace. PPI dropped -2.9% yoy, in line with expectations and an improvement from -3.6% yoy in July. The figures highlight China’s ongoing struggle with persistent factory-gate deflation, which has now lasted nearly three years.

The CPI outlook looks shaky and this week's print may show a rise of about 0.3% this past month, which could lift the annual rate to roughly 2.9%. Some analysts even think it might hit 3% year‑over‑year.

The boost seems tied to higher food and energy costs. One estimate even points to a 2% jump in gas prices month‑to‑month, therefore pressure stays on and shoppers likely notice higher costs at checkout.

US Core CPI Debate

The real debate, though, centers on core CPI numbers – the ones that leave out the wild food and energy swings. Different analysts see two paths ahead. One camp thinks we’ll see a 0.3 % rise from month to month, which would leave the annual rate stuck around 3.1 %. The other, more cautious group, pictures a 0.4 % jump, the biggest since January and the second biggest in almost two years. That tiny gap between 0.3 and 0.4 isn’t just a math detail; it could change how we read inflation.

A 0.3 increase might still be called “sticky,” yet it could be part of a rough but steady slowdown in price growth. A 0.4 rise, however, seems to signal a clear push back up, shaking the idea that inflation is finally easing.

If that happens, the question is will the Fed change its policy stance? My answer is no but markets would probably react quickly, and investors might demand higher yields on bonds.

Source: TradingEconomics

Underlying Drivers: Where the Inflationary Pressures Originate

The rise in inflation looks like it will be spread across many items, not just a few. A bounce back in core goods prices may add about 0.25 % from month to month, which could push the annual rate up to its biggest point since May 2023. Parts of this push could be new cars, clothing, sports gear, and even phones or tablets.

At the same time, the hoped‑for relief from slower service inflation appears to be fading. Forecasts suggest core services might go up roughly 0.30 % in August, with travel‑related services—especially hotel costs—showing a strong climb of around 1.0 %. This broader strength in both goods and services therefore hints that price pressures are no longer limited to narrow sectors but may be more rooted in the overall economy.

Policymakers will be watching these trends closely even as the labor market dominates the discussion at the moment.

The Fed’s Policy Puzzle: A Rough Road Ahead

The road ahead for the Federal Reserve is expected to be a bumpy one. Concerns about Fed independence, worsening labor market conditions and political drama will keep the Fed the center of attention for the remainder of 2025.

As things stand, the labor market is going to be the center of focus for now. However, if inflation begins to rise again as tariffs begin to start filtering through and companies pass the increases to consumers, inflation could play a much bigger role later in the year.

Potential Implications for the US Dollar and Rate Cut Expectations

Two things mainly push the dollar when a CPI report comes out. First, interest‑rate gaps – the difference between U.S. Treasury yields and the yields you see in other countries. Those gaps decide where money moves.

Second, Fed‑policy guesses – how people see the chances of the Fed raising or lowering rates. Those guesses shift the gaps. When CPI numbers change what folks expect the Fed will do, they also change how attractive U.S. assets look. That can lift the dollar or drop it.

When the CPI looks “hot” – say the core number is 0.4 % or higher – it hints that inflation is still strong. That may mean the Fed will keep tightening or even go harder. Traders then want more dollars, Treasury yields climb, and the DXY (the dollar index) usually goes up. At the same time, stocks can feel pressure because borrowing costs look higher.

But a “cool” CPI – core 0.3 % or lower – suggests price growth is slowing. The market may turn more dovish, thinking the Fed could pause or cut rates sooner. Lower expected yields make the dollar less tasty, so it often slides down. Treasury yields tend to fall, and risk assets like equities might get a boost from cheaper money.

In short, the dollar’s move is a straight line from CPI‑driven belief changes to interest‑rate gaps, then to the dollar’s strength.

What could happen based on those ideas:

• Hot CPI (core 0.4 %+): Dollar likely goes up against other currencies (DXY climbs); Treasury yields rise; stocks may drop.
• Cool or Neutral CPI (core ≤0.3 %): Dollar may sell off; Treasury yields fall; equities could rally.

If the CPI lands right at the expected 0.3 % core, markets sometimes do a “buy the rumor, sell the fact” trick. If people already priced in a hawkish Fed, the on‑target number can cause a quick, technical dip in the dollar. That shows why the headline number and how it differs from consensus both matter.

So, in the current climate markets are expecting a slight uptick in inflation. Meaning if we do get a softer print, the immediate reaction could see the probability of a 50 bps rate cut on September 17 rise. This will lead to a selloff in the US Dollar but is unlikely to last as markets will likely cool off once the data has been fully digested.

US Equities may attract a lot of interest as they have continued to rise in recent trading sessions. I expect that the volatility we see with US equities will outweigh volatility elsewhere irrespective of whether the data is positive or negative.

US Dollar Index (DXY) Daily Chart, September 9, 2025

Source: TradingView.com (click to enlarge)