LONDON (Realist English). On September 29, the dollar index rose slightly near a two-month high, reaching 101.2. Since the start of the month, it has gained 1.8%, which could be its best monthly result since June. The euro is trading at 1.1360 against the dollar, near a three-month low; the pound is at 1.3242, also near a three-month low.
Rising Oil Provides Support
Brent futures rose more than 2% on September 29, exceeding $107 per barrel; WTI futures also gained more than 2%. The immediate trigger for the oil rebound was market doubts about the prospects for a US-Iranian truce — US President Donald Trump rejected the ceasefire plan proposed by Iran, depriving the market of hopes for a swift reopening of the Strait of Hormuz.
“Geopolitical uncertainty and energy supply risks are amplifying inflation fears, prompting traders to price in a more hawkish Fed policy,” said OCBC currency strategist Sim Moh Siong.
US Treasury Yields at Multi-Year Highs
The sell-off in US government bonds continues to deepen, with yields reaching multi-year highs. The 10-year yield is trading near 5.237%, approaching the 5.274% reached on Monday — the highest since June 2007. The 30-year yield rose to 5.555%, near its highest since 2004.
The 10-year yield has risen nearly 30 basis points in two days — one of the sharpest bond sell-offs in recent years. The preliminary September PMI hit a five-year high, inflation pressure has intensified again; combined with high oil prices and large-scale government borrowing, this is pushing yields upward.
Jobs Data in Focus
The market’s focus is shifting to key economic data being released this week. The PCE index on Wednesday and the jobs report on Friday are expected to support expectations of further Fed rate hikes.
According to CME Group’s FedWatch tool, the market estimates the probability of a rate hike at the Fed’s late-October meeting at more than 70%, versus 57% a week earlier.
According to September jobs data, Wall Street economists on average expect 100,000 jobs to be created. BNP Paribas forecasts 90,000, noting that “despite continued Fed tightening, we remain optimistic about the US labor market.” However, Bank of America economist Aditya Bhave expects only 60,000, considering the strong August figure an exception. Pantheon Macroeconomics also forecasts only 60,000, pointing to weakening seasonal support.
Consumer Sentiment Deteriorates
Despite the resilience of the labor market, US consumer sentiment has fallen sharply due to high inflation (especially gasoline prices). The University of Michigan consumer sentiment index fell from 51.7 in August to 48.1 in September; household expectations regarding personal financial situations dropped by about 10%.
“Short-term business prospects have deteriorated sharply,” said Joanne Hsu, director of the University of Michigan survey. “This reflects renewed concerns that high oil prices and escalating trade disputes will slow the economy as a whole.”
Actions of Other Central Banks
The Reserve Bank of Australia raised its rate to 4.60% on September 29 — a 15-year high; the decision was unanimous. The regulator stated that inflation is too high and it is ready to raise rates further if necessary. The Australian dollar briefly rose to 0.7029, after which it retreated.
The yen weakened against the dollar to 157.5, shedding part of Monday’s gains. Japanese Vice Minister of Finance for International Affairs Atsushi Mimura said the market should pay attention to the “very clear” warnings made by Tokyo and Washington last week; traders remain wary of intervention risk.
