MUFG’s Lee Hardman notes the US Dollar has weakened, with the Dollar Index dropping below Friday’s high as Brent declines towards USD90. Lower Oil prices and falling US Treasury yields are easing pressure on the Fed, while markets await the October US CPI report. Futures still price a December Fed hike but fewer moves in 2027.

Dollar softens as yields retreat

“The US dollar has continued to trade at weaker levels overnight after giving back all of its gains yesterday following the release of the stronger NFP report on Friday.”

“The move lower in energy prices is also helping to bring down government borrowing costs.”

“If there is further progress towards a US-Iran deal to end the conflict it would help to sustain lower energy prices and ease pressure on major central banks including the Fed to keep hiking rates.”

“The main focus today will be the release of the latest US CPI report for October.”

“The US rate market still expects the Fed to hike rates again as planned at the end of this year in December but has been scaling back expectations for further hikes in 2027.”