This briefing covers Friday's session (October 16), the last completed New York close before the new week.
The dollar finished the week softer, extending a slide that began Thursday. The trigger was what Fed Chair Kevin Warsh did not say. Speaking overnight at the IMF gathering in Bangkok, he declined to sketch the path for the rest of 2026, naming the October and December meetings as the real decision points. After last week's hot inflation and producer-price reports, traders had been leaning toward another hike at the October 27-28 meeting; a chair who refuses to confirm it was enough to trim those bets sharply. Sterling was the clearest beneficiary, climbing to around 1.33, its best level in roughly three weeks. EUR/USD edged up to the 1.124 area, while USD/JPY hovered just under 158.
Risk appetite was the other half of the story. US equities gave up early gains and technology led the decline, with renewed doubts about the cost and payback of the AI build-out. Money rotated into Treasuries, and the 10-year yield ended the week noticeably lower after testing levels above 5.3% the previous Monday. Gold firmed modestly as the dollar eased. Crude swung around on Middle East and Black Sea headlines and finished firmer, keeping energy-driven inflation on everyone's radar.
Worth understanding: why would the dollar fall in a week when US inflation ran hot? Currency prices move on the gap between what happens and what was already expected. By the time CPI landed, a good part of the hawkish case was in the price, and positioning was leaning one way. When the expected follow-through from the Fed did not arrive, the marginal trader had more reason to take profit than to add. Rate differentials still favour the dollar; what changed is the expected direction of that differential. The euro's rebound is also fragile on its own terms, given France's fiscal strains and a cautious ECB.
On deck:
- US NAHB housing market index on Monday.
- China's third-quarter GDP and September activity data early in the week (check the exact release day).
- Flash PMIs on Friday, the last major data before the Fed's late-October decision.
- Oil headlines, which remain the wild card for inflation expectations.
With a central bank keeping its options open, data surprises can move prices more than usual. Size positions with that in mind.