US CPI Surprise Fuels Fed‑Easing Bets

The September U.S. CPI release — compiled amid the government shutdown after furloughed BLS staff were recalled — came in below forecasts (around 3.1% YoY expected), prompting a softer dollar and sending EUR/USD above 1.1600 as markets repriced Fed policy. Traders sharply increased bets on Fed easing, pricing near‑certain odds of a 25bp cut at the Oct. 28–29 meeting and materially higher chances of at least a half‑point of cumulative cuts by year‑end. FX was choppy: EUR/USD swings reflected position‑squaring around the CPI shock while EUR/GBP traded near 0.8720 as stronger‑than‑expected Eurozone PMIs and surprise UK retail‑sales strength left the pair rangebound. Japan’s core CPI accelerated to 2.9% year‑over‑year in September, driven by higher utility bills after reduced subsidies and large food‑price increases, underscoring uneven global inflation pressures. The dollar still found support from firmer Treasury yields and a stronger existing‑home‑sales print, but gains were capped by worries that the prolonged U.S. shutdown will weigh on growth and push the Fed toward easier policy.