Dollar Rises on Hawkish Fed Comments and Euro and Yen Weakness

Core Insights - The dollar index rose by +0.48% to a 1.5-week high, driven by hawkish comments from Federal Reserve officials and political uncertainty in France and Japan [1] - The ongoing US government shutdown poses a bearish outlook for the dollar, with potential negative impacts on GDP growth [2] - The euro fell by -0.50% to a 1.5-week low due to signs of weakness in the Eurozone economy and political turmoil in France [5] - The yen declined by +1.00% against the dollar, reaching a 7.5-month low, influenced by concerns over Japan's monetary policy under new leadership [7] Federal Reserve Insights - Kansas City Fed President Jeff Schmid emphasized the need for continued monetary policy measures to combat high inflation [3] - Minneapolis Fed President Neel Kashkari warned against drastic interest rate cuts, citing stagflationary signals in the data [3] - Markets are pricing in a 93% chance of a -25 basis point rate cut at the upcoming FOMC meeting [4] Eurozone Economic Indicators - German factory orders unexpectedly fell by -0.8% month-over-month, contrary to expectations of +1.2% [6] - Political instability in France, following the resignation of Prime Minister Lecornu, is contributing to the euro's decline [5] Japanese Economic Context - The election of Sanae Takaichi as the leader of Japan's ruling party raises concerns about delayed monetary policy tightening by the Bank of Japan [7] - Takaichi's victory has led to fears of increased debt supply due to her support for expanded financial stimulus [7]