Sticky inflation, uncertainty around the Federal Reserve's policy path, and a sharp pullback in technology stocks shaped global market sentiment this week, while renewed attacks on Gulf shipping routes pushed energy prices to their highest levels in five months.
The US Dollar Index ended the week at 101.77, down 0.4 percent, after briefly touching an 18-month high of 102.9. September CPI data showed headline inflation accelerating to 3.7 percent year-on-year from 3.4 percent, driven by higher energy costs, while core inflation rose 0.3 percent month-on-month against expectations of 0.2 percent. Despite the inflation surprise, the dollar's gains faded as a selloff in AI and semiconductor stocks triggered a rotation into government bonds, easing Treasury yields.
Fed Chair Kevin Warsh refrained from offering fresh policy guidance at the IMF and World Bank meetings in Bangkok, helping ease concerns of consecutive rate hikes. Fed officials continued to send mixed signals. John Williams supported one additional rate hike this year, Austan Goolsbee described the inflation data as discouraging, Beth Hammack warned further tightening may be needed if inflation expectations rise, while Michelle Bowman saw no immediate urgency to act.
Combined with softer labour market data, markets are now pricing roughly a 20 percent chance of a rate hike in October and close to a 90 percent probability in December. US equities ended mixed, with the Dow Jones posting gains while the S&P 500 fell nearly 2 percent and the Nasdaq declined 4.5 percent amid broad weakness in technology shares.
Precious metals came under pressure after the stronger-than-expected inflation print. Spot gold fell to a two-month low of $4,073 per ounce and silver dropped to $55.4 per ounce, its weakest level since July. Both metals later recovered as the dollar retreated toward a two-week low and investors increasingly expected the Fed to leave rates unchanged this month. Gold rebounded to $4,198 an ounce and ultimately settled near $4,165 an ounce, while silver closed around $57 an ounce, down roughly 6 percent for the week as markets balanced expectations of a policy pause against the likelihood of a December rate hike.