US inflation exceeds expectations and officials adopt hawkish stance, driving US Dollar Index up over 0.6%

U.S. inflation data for October exceeded expectations for the third consecutive month. In addition, Federal Reserve Governor Waller supported a rate hike in December, driving the U.S. Dollar Index to rise more than 0.6% on Tuesday—the largest single-day gain since September. The market further increased its bets on an interest rate hike in 2027 and began to consider a small possibility of a 50 basis point hike in December, while previously it had fully priced in the expectation of a 25 basis point hike in December. Dallas Federal Reserve President Logan also supported at least two more rate hikes, each by 25 basis points. Major currencies weakened against the U.S. dollar, with the Norwegian krone, Australian dollar, and Swedish krona all down more than 1%, and the Japanese yen once falling 0.6%. The market believes that as long as the Federal Reserve maintains a hawkish stance, the U.S. dollar still has room for further short-term strength.