Fed Rate Hike Expectations Surge on High Inflation

A higher-than-expected US CPI report, which one Federal Reserve official described as "borderline disturbing," has solidified market expectations for another rate hike in December. Other Fed speakers reinforced a hawkish outlook, stating that further gradual rate increases are appropriate to combat high inflation.

US Dollar Strengthens Across the Board

Driven by expectations of higher US interest rates, the US Dollar rallied broadly, exerting pressure on major currencies including the Australian dollar, euro, and Japanese yen. The dollar's strength was significant enough to weaken the Canadian dollar despite rising oil prices, and China's central bank also set a weaker daily reference rate for the yuan.

Commodities React to Macro and Geopolitical Pressures

Gold prices steadied following a sharp selloff, as the market absorbed the impact of a stronger dollar and firming bets for a Fed rate hike. In energy markets, oil prices rebounded from recent lows, supported by reports of shrinking US inventories and persistent Middle East risks which offset some optimism from diplomatic efforts.