Dollar Pares Gains as Fed’s Williams Cools Rate-Hike Bets
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The US dollar pared part of its recent gains after New York Federal Reserve (Fed) President John Williams said there was “no need for urgency” in raising interest rates again. Markets subsequently scaled back expectations for an October increase, with pricing for a 25-basis-point move falling to around 50% from roughly 71% earlier in the session.
The shift came alongside softer US data. Conference Board Consumer Confidence fell to 81.9 in September from 88.6 in August, its lowest level since April 2014, while JOLTS Job Openings declined to 7.079 million from 7.335 million and came in below expectations. The softer data and Williams’ comments were followed by lower expectations for near-term tightening, although other Fed officials maintained a more hawkish tone.
The dollar nevertheless remains firm, with longer-dated US Treasury yields still close to multi-year highs. EUR/USD is trading near recent lows around 1.1335, while GBP/USD remains close to 1.3235. Markets are now awaiting today’s US PCE inflation data, ADP employment figures and final UK second-quarter GDP for further indications on growth, inflation and rate expectations.
GBP: Sterling Holds Near June Lows as BoE Debate Turns More Cautious
GBP/USD: 1.3274 | EUR/GBP: 0.8552
GBP/USD is trading around 1.3274 after slipping to its lowest level since late June during Tuesday’s session. Sterling remained under pressure, while Bank of England (BoE) policymaker Alan Taylor pushed back against the case for an immediate rate increase, arguing that current evidence does not yet show energy-driven inflation becoming embedded across the wider economy.
Taylor also questioned the practicality of delivering a single rate increase, warning that markets could interpret one move as the start of a broader tightening cycle. His comments contrasted with the more hawkish signals seen earlier in the week and highlighted differing views within the BoE over how quickly policy should respond to higher energy prices.
The domestic growth picture was firmer this morning, however, after the final second-quarter GDP was revised up to 0.5% from 0.4%. Household disposable income and business investment were also revised higher, indicating somewhat firmer recent growth conditions even as business confidence has weakened.
EUR/GBP is holding around 0.8552, with sterling remaining slightly firmer against the euro than against the dollar. The cross remains sensitive to differing UK and Eurozone rate expectations.
Key technical reference levels for GBP/USD: resistance sits near 1.3250, followed by 1.3300, while support sits around 1.3200, followed by 1.3150.
Key technical reference levels for EUR/GBP: resistance sits near 0.8600, followed by 0.8610, while support sits around 0.8570, followed by 0.8560.
EUR: Euro Nears 16-Month Low as Eurozone Sentiment Softens
EUR/USD: 1.1358
EUR/USD is trading around 1.1358 after falling as low as 1.1312, its weakest level since May 2025. The euro remains under pressure despite some easing in near-term Fed rate-hike expectations, while European growth, energy and political risks remain in focus.
Fresh Eurozone sentiment data also pointed to a softer domestic backdrop. Consumer confidence was confirmed at -16.5 in September, down from -15.5 in August, while the Economic Sentiment Indicator eased to 97.9 from 98.4. The readings are consistent with cautious household and business sentiment, while elevated energy costs and wider uncertainty remain key concerns.
The weaker sentiment readings add to the factors being assessed by the European Central Bank (ECB) alongside persistent inflation risks and signs of softer demand. Energy costs remain an upside risk to inflation, while weaker confidence points to softer domestic conditions.
Markets are awaiting Thursday’s Eurozone HICP and Core HICP readings for a further update on regional inflation pressures and the ECB rate outlook.
Key technical reference levels for EUR/USD: resistance sits near 1.1410, followed by 1.1469, while support sits around 1.1325, followed by 1.1270.
USD: Dollar Holds Monthly Gains as Fed Hike Expectations Ease
DXY: 101.40
The Dollar Index (DXY) is holding around 101.40 after posting its strongest monthly advance against the euro in more than a year. The dollar remains firm alongside elevated US Treasury yields, while expectations for another Fed increase have eased alongside softer labour and confidence data.
New York Fed President John Williams said there was no need for urgency in raising rates again. Markets subsequently reduced expectations for an October move. Interest-rate pricing subsequently placed the probability of an October increase at around 50%, down from roughly 70% earlier in the session, with more weight placed on the possibility of a later move.
Tuesday’s data also pointed to some moderation in US demand. Job openings fell to 7.079 million in August, while consumer confidence dropped sharply to 81.9, pointing to softer labour-market and household conditions. Even so, layoffs remained low.
Markets are now awaiting today’s PCE inflation data, ADP Employment Change and final second-quarter GDP for further indications on the Fed rate outlook.
Other Currencies: Yen Firms Amid Intervention Warnings as Aussie Slips After CPI
AUD/USD: 0.6968 | NZD/USD: 0.5645 | USD/JPY: 157.10 | GBP/JPY: 207.40
AUD/USD is trading around 0.6968 after Australian inflation data showed consumer prices rising 0.4% in August and 4.0% year-on-year, up from 3.5% previously. Trimmed-mean inflation held at 3.6%, while the monthly increase came in slightly below expectations. The Australian dollar weakened after the release, while markets assessed the implications for the Reserve Bank of Australia’s (RBA) policy outlook following Tuesday’s rate increase.
China’s official Manufacturing PMI rose to 50.1 from 49.8, returning to expansion after two months of contraction, while the Non-Manufacturing PMI increased to 50.2. Private-sector surveys were firmer, with manufacturing rising to 52.1 and services to 51.6. The stronger Chinese readings pointed to a firmer regional growth backdrop, while the Australian dollar remained under pressure following the inflation release.
NZD/USD remains near 0.5645, close to recent lows, while broader US-dollar moves remain in focus despite stronger Chinese activity data. USD/JPY has eased towards 157.10 amid renewed official warnings over excessive currency weakness, while GBP/JPY is trading around 207.40.
Current Rate Table
| Pair | Rate | Trend |
|---|---|---|
| GBP/USD | 1.3274 | Bearish short-term |
| EUR/GBP | 0.8552 | Mildly bullish GBP |
| EUR/USD | 1.1358 | Bearish short-term |
| USD/JPY | 157.10 | Mildly bullish USD |
| AUD/USD | 0.6968 | Bearish short-term |
| NZD/USD | 0.5645 | Neutral to bearish |
| USD/CAD | 1.4210 | Mildly bullish USD |
Market Lookahead
Wednesday, Sep 30
- US PCE Price Index & Core PCE Price Index (Aug)
Thursday, Oct 01
- EUR Eurozone HICP & Core HICP (Sep)
- US ISM Manufacturing PMI (Sep)
Friday, Oct 02
- US Nonfarm Payrolls (Sep)
- US Average Hourly Earnings (Sep)
- US Unemployment Rate (Sep)
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