Forex News 1 Oct 2026: Soft PCE, but Yields Climb Ahead of ISM

On Wednesday (30 Sep), the US Bureau of Economic Analysis (BEA) released the August PCE price index. Core PCE, the Fed’s preferred inflation gauge, held at 3.0% YoY, below the 3.3% forecast, and rose 0.2% m/m (f/c 0.3%), while headline PCE was 3.4%, below the 3.7% forecast. The dollar and yields dropped immediately after the release but recovered quickly because other data were strong: the final Q2 GDP reading was revised up to 2.2% from 1.5%, and September ADP private payrolls rose 90K, above forecast. According to investingLive, the 10-year yield closed at 5.29% (+3.6bp) and the 30-year at 5.63%. The Dow fell 0.86% to end September at its lowest level since June, while the Atlanta Fed’s GDPNow cut its Q3 GDP estimate to 3.7% from 5.0% after the US goods trade deficit for August widened to $132.6 billion.

On the Fed side, CME FedWatch data reported consistently by several outlets after the PCE release showed markets pricing the chance of a Fed rate hike at the 28 Oct meeting at about 47%, with about a 53% chance of a hold, down from around 70% earlier in the week, after New York Fed President John Williams said there was no urgency to raise rates. However, Neel Kashkari of the Minneapolis Fed still sees inflation as too high. In oil, WTI rose $0.92 to close at $90.30 and was around $90 this morning (1 Oct), according to Trading Economics, as markets weighed recovering Middle East supply, with shipments through the Strait of Hormuz back to about 13.2 million barrels per day, against US–Iran talks that have yet to produce a lasting deal. In Japan, the Q3 Tankan survey released this morning showed the large manufacturers index rising to 24 from 22, below the 25 forecast, while the non-manufacturing index fell to 35 (f/c 36).

“Inflation is still too high, even though the latest PCE figures came in softer than expected”

View of Minneapolis Fed President Neel Kashkari, 30 Sep (paraphrased)