The U.S. dollar index (DXY) surged to a 1.5-month high on Wednesday, increasing by +0.64%, bolstered by a stronger-than-expected rise in August retail sales, which were up +1.2% month-over-month compared to the anticipated +0.8%. This growth coincided with the Federal Open Market Committee’s decision to raise interest rates by 25 basis points, signaling potential further hikes by year-end.
Key updates from the FOMC included raising the 2026 GDP forecast to 2.3% and core inflation estimates to 3.4%. Additionally, market expectations now reflect a 57% chance of another 25 basis-point hike at the upcoming meeting on October 27-28. Meanwhile, the EUR/USD fell to a 1.5-month low, declining by -0.68%, under pressure from the dollar’s strength.
In Japan, the yen slid to a one-week low as markets predicted a nearly certain 25 basis-point increase from the Bank of Japan at Friday’s policy meeting. Japan’s August exports grew +19.3% year-on-year, exceeding expectations, while core machine orders fell -3.7% month-over-month, which was worse than the anticipated -1.2%.
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