By Eric Chia, Financial Markets Strategist at Exness
The dollar traded in a narrow range on Tuesday, with investors awaiting key US data to refine expectations for the Federal Reserve’s next policy move. Despite markets pricing an 81% probability of a December rate cut, the greenback has yet to show a decisive downside break, reflecting caution ahead of this week’s releases. Treasury yields were broadly steady, with the 10-year holding near 4.03% after slipping in the previous sessions.
Attention now shifts to today’s retail sales data and to Wednesday’s September Producer Price Index, where headline inflation is expected to rise 0.3% after a 0.1% decline in August. A stronger reading could temper expectations of near-term easing, supporting both the dollar and long-term yields, while softer figures would reinforce the dovish narrative that has dominated recent Fed communication. Several officials have signaled growing concern over labor-market softness, strengthening the case for a December cut.
With markets awaiting clarity, the dollar is likely to remain in consolidation territory, with today’s data releases poised to dictate short-term direction for both the currency and the treasury curve.