DXY Firms to 99.53 Ahead of FOMC Minutes and UK CPI

The Dollar Index firmed to 99.5290, up 0.10% on the day, a modest bounce after sitting near a two-month low earlier this week on fading Fed rate-hike bets (CNBC, Aug 17). Treasury yields eased: the 10-year fell 1.6bp to 4.708%, the 30-year 2.3bp to 5.286%, the 5-year 0.9bp to 4.367%, while the 3-month ticked up 0.2bp to 3.705%. Equities softened — the S&P 500 fell 0.63% and the Nasdaq 1.60% — while the VIX rose 3.42% to 15.71. Desk notes put Fed September hike odds at roughly 30-31%, down from about 50-52% a week earlier, after soft US retail sales and unexpected job losses.

Today's headline event is the FOMC minutes from the July 28-29 meeting, due 14:00 ET (listed as 04:00 on today's calendar). That meeting held the target range at 3.50%-3.75%, with three dissents favouring a quarter-point hike — the minutes should show how policymakers weighed that split. Desk notes put Fed September hike odds near 30-31%, down from roughly 50-52% a week ago on soft US data. Elsewhere, the ECB held its deposit rate at 2.25% on 23 July after a June hike, with a Reuters poll showing 57 of 69 economists expecting a 25bp hike to 2.50% on 10 September. The Bank of England held Bank Rate at 3.75% by a 6-3 vote in July, with three members backing a hike to 4%.

EUR/USD: 1.1577, -0.03%, holding near recent highs after German ZEW sentiment beat at 34.2 versus 30.0 expected, up from 26.3. GBP/USD: 1.3535, -0.06%, softer after ONS data showed UK unemployment rising to 4.9% from 4.7% and vacancies falling to around 707,000; today's UK CPI print is next up. USD/JPY: 159.60, +0.08%, yen weaker on fiscal concern over PM Takaichi's unfunded consumption-tax cut, though roughly 80% market-implied odds of a September BoJ hike (MUFG) are seen capping further declines. USD/CAD: 1.3904, +0.21%, with oil mixed — Brent up 0.23% to 91.08, WTI down 0.07% to 84.04.

USD/CAD trades at 1.3904, up 0.21%, near the top of its recent range. In Tuesday's session the pair held broadly steady even as the dollar sat near a two-month low, with Fed September hike odds trimmed to roughly 31%, from about 52% a week earlier (CNBC, Aug 17). CAD gave back part of Monday's gain after Statistics Canada's July CPI beat forecasts (+3.0% y/y vs +2.8% in June). Oil sent mixed signals: Brent rose about 1% on Aug 18 toward roughly $92/bbl on Strait of Hormuz supply-risk headlines, even as IEA/OPEC cuts to 2026 demand forecasts and a large US crude inventory build (17.4 million barrels, week to Aug 7) kept demand soft. No major Canadian data is due today; a fresh Crude Oil Inventories print and this afternoon's FOMC minutes are the bigger swing factors for the pair. Desk sentiment: neutral.

Today's calendar is heavy. UK CPI y/y (16:00, forecast 2.9% vs 2.6% previous) and core CPI (forecast 2.5% vs 2.6%) lead the UK session, alongside UK PPI and RPI prints. ECB President Lagarde speaks twice, at 17:10 and 20:15. The eurozone's Current Account (18:00) and Final CPI/Core CPI y/y (19:00, forecast 2.9%/2.5%) follow, plus a German 10-year bond auction at 19:42. The US session brings Crude Oil Inventories at 00:30 (previous 17.4M) and the day's headline event, the FOMC Meeting Minutes, at 04:00. Overnight, Japan's Trade Balance (09:50), China's Loan Prime Rates (11:00), and Australia's Employment Change (11:30, forecast 11.7K vs 76.3K previous) and Unemployment Rate (forecast 4.4%) round out the session.