Dollar holds near 18-month high as Goolsbee and Beige Book follow hot CPI

The dollar ended the US session firm and near an 18-month high, according to Investing.com, which reports that the hot September CPI report has put an October Fed hike back in play. Since our afternoon recap, Fed comments and the Beige Book have added weight to that view.

What moved and why

The trigger remains the US inflation data. investingLive reports that headline CPI rose to 3.7% in September against 3.6% expected and 3.4% prior. Core CPI rose to 2.6% against 2.5% expected, with core up 0.33% on the month against 0.2% expected. For a primer on why a gap between actual and forecast moves currencies, see our sister site's explainer on how a data surprise like this CPI beat works.

The follow-up came later in the day. In its Americas wrap, investingLive reports:

• Chicago Fed President Goolsbee said CPI was discouraging and that more bad months would be unacceptable.
• The Fed's Beige Book showed nine of 12 districts reporting growth as price pressures broaden.
• The dollar led and sterling lagged among the majors.
• The US 10-year yield ended down 2.3 basis points at 5.19%, giving back part of its early jump.
• Gold fell $54 to $4,103, the S&P 500 lost 1.2% and WTI crude rose 98 cents to $95.12.

On sterling, Investing.com reports that the pound fell as hotter US core inflation boosted the dollar. Investing.com also reports that UBS is sticking to its buy-dollar-on-dips call.

The majors: ECB fixings for 14 October

The table shows the ECB reference rates of 14 October against the 13 October fixing. These are a single daily snapshot, so they may not reflect later moves in the session. They show the dollar softer against the euro, sterling and the Aussie, but firmer against the yen and the franc.

AUD/USD was the standout, with its fixing up 0.84% over five fixings. USD/MXN fixed at 18.365, up 1.5% over the same stretch. Charts: DXY and AUD/USD.

Central banks and data in the news

Canada

August building permits rose 8.8% month on month against 2.0% expected, investingLive reports. The prior reading was revised to -15.8% from -17.3%.

Eurozone

Spain's final September CPI was confirmed at 4.9%, up from 4.3% in August, with core rising to 3.1%, according to investingLive, which says the data adds to ECB rate hike pressure. ECB Supervisory Board member Frank Elderson gave a speech titled "Ensuring resilience in the face of uncertainty".

China

New bank loans rose to ¥1.08 trillion in September, beating expectations of ¥975 billion, investingLive reports. It notes lending is still down about 16% from a year earlier. USD/CNY fixed at 6.693, nearly unchanged.

What to watch next

1. Australian jobs data. In an investingLive preview, NAB, Westpac and consensus all see a 20,000 gain, with three major banks expecting unemployment steady at 4.6%. The site says a drop to 4.5% would revive the case for further RBA tightening, while a rise to 4.7% would support the view that four hikes are already doing enough.
2. Fed pricing for October. Investing.com reports a hike is back in play. Further comments from Fed officials after Goolsbee's remarks will test that view.
3. ECB hike pressure. Rising Spanish inflation keeps the focus on ECB rate expectations and the euro.

FXcash Markets Desk