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The US dollar advanced strongly against major foreign currencies as Treasury yields rose following upbeat economic indicators and hawkish signals from Federal Reserve officials. The flash S&P Global US composite PMI surged to 58.4, marking its highest level since July 2021, driven by robust performance in the services sector and firming business activity. These strong figures reinforced market expectations that the Federal Reserve has sufficient room to implement additional monetary tightening to curb persistent inflationary pressures.
Several Fed policymakers expressed strong concern over sticky price pressures. Richmond Fed President Tom Barkin noted that inflation risks continue to outweigh employment risks, while Boston Fed President Susan Collins and Fed Governor Michael Barr emphasized the necessity of further policy adjustments to bring inflation back down to the 2% target. Consequently, futures markets quickly re-priced the probability of an October rate increase to approximately 72%, up significantly from 50% in previous sessions.
For currency traders and global bond markets, the surge in US yields enhances the relative yield advantage of holding dollar-denominated assets. Looking forward, market participants will closely watch upcoming inflation data and comments from Fed speakers ahead of the late-October FOMC meeting, especially as political commentary and election-related debates around interest rate policies begin to intensify.
