US October inflation keeps a December cut from the Fed in play

Inflation in the US picked up in October with the headline CPI index rising by 2.6% y/y compared with 2.4% a month earlier. On a monthly basis prices rose by 0.2%. Core inflation was steady at 3.3% y/y in October, the same level it recorded in September while the monthly pace of core price increases was 0.3%. Super core inflation accelerated to 4.4% from 4.3% a month earlier. The primary contributor to CPI in October was housing costs with shelter providing most of the annual increase. Core goods remain in deflation while energy prices also pulled lower year on year. Producer prices are due later today and are expected to show a modest uptick month/month. Markets will be digesting the PPI data along with the CPI to assess how the PCE deflator will evolve and the Fed’s reaction to. Post the CPI data markets have increased their expectations for a 25bps cut from the Fed at the December meeting to about 83%.

Today’s Economic Data and Events

• 10:00 SR CPI Oct y/y %
• 14;00 EC GDP Q3 y/y: forecast 0.9%
• 17:30 US PPI Oct m/m: forecast 0.2%
• 17:30 US initial jobless claims Nov 9: forecast 220k

Fixed Income

• US Treasuries turned higher overnight following the release of the October inflation data. Yields on the 2yr UST fell by 5bps to 4.2857% though the 10yr still managed to dip, with yields up by 2bps. That helped to steepen the curve by about 8bps to 16bps. Markets are currently pricing in about 21bps of easing at the December FOMC and another two 25bps cuts across the rest of 2025.
• Bond markets were relatively soft overnight with high-yield and emerging markets lower.

FX

• The US dollar held its gains for a fourth day overnight with EURUSD down 0.6% at 1.0564 while GBPUSD dropped by 0.3% to 1.2708. USDJPY rose by 0.6% to close at 155.46. Commodity currencies also fared poorly with USDCAD up by 0.4% at 1.3997 while AUDUSD dropped by 0.7% to 0.6485.

Equities

• Equity markets had a mixed session overnight with performance in European and US markets split. The Dow Jones added 0.1% while the S&P 500 managed to just stay flat. European markets trended lower while the FTSE rose by less than 0.1%.
• In the region, Dubai was the standout market. The DFM added 0.7% while the ADX was lower by 0.4% and the Tadawul fell nearly 1%.

Commodities

• Oil prices pulled modestly higher overnight, gaining by 0.5% on the Brent market to USD 72.28/b while WTI added about the same amount to close at USD 68.43/b. The API reported a draw in US crude stocks of 800k bbl last week while gasoline and distillate stockpiles were higher.