Forex Today: US Dollar shows resilience ahead of next batch of data

Here is what you need to know on Thursday, October 1:

Following the choppy action seen on the last day of the third quarter, the US Dollar (USD) holds its ground against its rivals in the European morning on Thursday. The US economic calendar will feature weekly Initial Jobless Claims data and the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index report for September. Several policymkers from the European Cental Bank (ECB) and the Federal Reserve (Fed) will be delivering speeches throughout the day.

On Wednesday, the Automatic Data Processing (ADP) reported that employment in the private sector increased by 90K in September, surpassing the market expectation of 70K. In the meantime, the US Bureau of Economic Analysis revised the annualized Gross Domestic Product (GDP) growth for the second quarter to 2.2% from 1.5% in the previous estimate, and announced that the core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose 3% on a yearly basis in August. This print came in below the market expectation of 3.3%. The US Dollar (USD) Index retreated with the initial reaction to the mixed data releases but managed to regain its traction later in the American session to end the day marginally higher. Early Thursday, the USD Index holds above 101.50.

US inflation revisions temper relief as Fed keeps October options open

Economists at Societe Generale note that August inflation data offered only limited comfort to the Fed. They highlight that while "Core PCE undershot expectations," the underlying picture was "less reassuring," with "softer core goods inflation" merely masking "a reacceleration in core services and super-core inflation, pointing to still-firm underlying price pressures."

Turning to the policy outlook, Societe Generale judges that "inflation revisions were modestly favorable, but growth revisions were more important." In their view, "the economy entered 2H26 with stronger momentum than previously thought, while underlying inflation remains too elevated to provide the Fed with clear comfort." As a result, they argue that "a pause in October remains possible, but an October hike remains on the table pending September CPI and PPI data."

Fed's Kashkari questions policy tightness as resilient economy keeps hawkish bias alive

Meanwhile, Minneapolis Fed President Neel Kashkari delivered a notably hawkish-leaning message, with a FXS Speechtracker score of 7.1/10, and further supported the USD late Wednesday. Kashkari underscored his concern that inflation near 3% remains “too high” despite recent data. Emphasis on a resilient economy, strong consumer spending, and broad job availability, alongside doubts about how tight policy really is and suggestions that the neutral rate may be higher and “elevated at least for now,” reinforced the case for keeping rates restrictive. The explicit penciling in of one more hike this year and another in 2027, while hoping to tame inflation with only modest action, signalled a bias toward further tightening if the economy and inflation fail to cool meaningfully.

The Bank of Japan (BoJ) published the Summary of Opinions from the September monetary policy meeting earlier in the day. The document showed that some members noted that it would be appropriate to keep raising the interest rate in line with the economy and price developments, while reiterating that they must focus on anchoring the underlying inflation near 2%. After closing virtually unchanged on Wednesday, USD/JPY gathers bullish momentum and trades near 158.20 in the European morning on Thursday, rising more than 0.5% on the day.

EUR/USD remains under bearish pressure after closing in the red on Wednesday and declines toward 1.1300.

GBP/USD benefited from the upbeat UK macroeconomic data on Wednesday and managed to register daily gains despite the broad USD resilience. The pair, however, fails to preserve its bullish momentum and trades marginally lower on the day near 1.3250 in the early European session.

Gold recovers modestly toward $4,200 in the European morning after losing about 0.6% on Wednesday.