US Dollar Softens as Core PCE Falls and Treasury Yields Climb

Global markets closed last week with heightened volatility after the United States reported a sharper-than-expected decline in the September Core PCE Price Index, which eased to 2.8%, its lowest level in three months. The softer inflation reading briefly pressured the US dollar index to a five-week low before it stabilized and ended Friday marginally weaker at 98.99, down 0.08% on the day.

Despite the decline in inflation, US Treasury yields moved in the opposite direction. The benchmark 10-year yield surged to 4.1410%, the highest in several weeks, while the 2-year yield—typically more sensitive to monetary policy expectations—climbed to 3.5710%. The parallel move between falling inflation and rising yields reflects growing investor conviction that the Federal Reserve may deliver a “hawkish rate cut” at the upcoming policy meeting.

Policy Expectations Dominating Market Sentiment

Market attention is squarely on the Federal Reserve’s rate decision this week. Investors overwhelmingly expect a 25-basis-point cut—potentially the third consecutive reduction—but remain divided on the forward guidance. Recent economic data, soft labor market conditions, and dovish commentary from multiple Fed officials have reinforced the argument for continued easing. However, the sharp rise in yields suggests expectations that the Fed may temper future cuts with a more cautious tone.

The dollar’s weakness last week aligned with these mixed signals. The euro edged near a three-week high at 1.16433, and traders now assign nearly a 90% probability to a rate cut at the upcoming meeting, along with as many as two more in the year ahead. Several major financial institutions, including Morgan Stanley, have revised forecasts and now anticipate a December rate reduction.

Meanwhile, speculation about leadership changes at the Federal Reserve is adding another layer of uncertainty. Reports that White House economic adviser Kevin Hassett may be considered to succeed Jerome Powell have stirred expectations of an even more accommodative monetary stance in the future.

JPY Gains on BoJ Policy Shift; Global Currencies Move Cautiously

The Japanese yen strengthened to 155.295 per dollar as markets increasingly anticipate that the Bank of Japan may raise rates in December. Reports indicate that BoJ officials are prepared to proceed with a hike provided no major external shocks emerge. The British pound traded steadily around 1.3329, near a six-week high.

Over the next two weeks, global monetary policy will be in focus as multiple central banks, including those of the United States, Australia, Canada, Switzerland, Japan, the United Kingdom, and the eurozone, prepare to release their rate decisions.

Oil Prices Rise on Geopolitical Uncertainty and Rate-Cut Expectations

Oil markets closed the week higher, supported by renewed expectations of a Fed rate cut and sustained geopolitical tension. WTI crude settled at $60.13 per barrel, up 0.7%, while Brent crude closed at $63.87, rising 0.8%. Both benchmarks reached their highest levels since mid-November.

The stalemate in US-Russia talks on Ukraine contributed to concerns about future supply constraints. Analysts noted that a lack of progress in peace negotiations provides upside risk to oil prices, while robust OPEC output remains a counterweight. At the same time, the US is reportedly considering military action in Venezuela, which could threaten the nation’s 1.1 million barrels per day of output.

The G7 and EU are also discussing replacing the Russian oil price cap with a broader ban on maritime services, a move aimed at further reducing Russia’s war-funding capacity.

Gold Gains as Dollar Weakens; Silver Hits Historic Highs

Gold prices rose last week, with spot prices trading near the $4,200 level and briefly approaching $4,260 before retreating. The weaker dollar and stronger conviction in a Fed rate cut offered support, although rising Treasury yields limited upside momentum. According to CME FedWatch data, markets now estimate an 86.2% probability of a 25-basis-point cut.

Silver extended its extraordinary rally, surging to a record intraday high of $59.32 per ounce and closing with a 2.6% daily gain. Year-to-date, silver has soared 98%, driven by structural supply shortages and its designation as a US “critical mineral.”

Technical Market Overview

The US dollar index faced resistance near 99.15 and found support at 98.80, suggesting a potential upward correction if the index remains above the support zone. The euro-dollar pair showed support around 1.1625 and resistance near 1.1675, pointing toward a possible downside continuation if the pair fails to break above the resistance level.

Gold maintained support above $4,191 and encountered resistance near $4,260. A sustained floor above $4,179 may extend the rally toward the $4,248 to $4,287 range.

Market Performance Recap

US equities closed higher, supported by strong corporate developments, including Netflix’s $830 billion acquisition of Warner Bros. Discovery and reports of SpaceX’s valuation potentially rising to $800 billion. European markets were more mixed, with the DAX gaining and the FTSE 100 declining.

Precious metals were mixed as gold retreated from intraday highs while silver continued marking historic gains.

CWG Markets Outlook and Strategy Guidance

CWG Markets expects short-term dollar strength and recommends buying near support levels with disciplined stop-loss execution. EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD, USD/CAD, and gold strategies remain focused on trading within defined ranges and capturing rebounds from key support or resistance levels.

The guidance emphasizes risk management, advising traders to secure profits exceeding 30 pips and avoid turning winning trades into losses. Position sizing recommendations are based on individual risk tolerance, ranging from 0.1 lot per $2,000 to higher allocations for accounts with greater risk capacity.