Hotter-than-expected US core inflation pushed the dollar higher against major currencies late in the New York session on November 10, as traders reconsidered the Federal Reserve’s options for December. The Australian dollar and sterling led losses, while the two-year Treasury yield posted the biggest increase along the curve. Gold, silver and cryptocurrencies fell. Markets priced in a 10% chance of a 50-basis-point rate hike in December, against 90% odds of a 25-basis-point increase.
Dollar gains as Australian dollar and sterling slide
Late-session trading showed the Australian dollar down 0.91% at $0.6863 and sterling down 0.75% at $1.3339. The euro fell 0.55% to $1.1161. The dollar rose 0.55% against the yen to 158.77 and gained 0.51% against the Canadian dollar to 1.4189, among its smaller advances against major currencies.
The moves followed the release of US inflation data. Core CPI rose 0.3% month over month for a third consecutive month, above the 0.2% forecast. Before the report, Fed Governor Christopher Waller had said a core CPI reading of 0.3% or higher could put a 50-basis-point increase on the table for December. The reported figure met that threshold, prompting traders to raise the odds of a larger move.
Two-year yield leads Treasury selloff; 10-year briefly tops 5%
Treasury yields rose across maturities. The two-year yield, which is particularly sensitive to expectations for Fed policy, climbed 18.65 basis points to 4.7335%. The five-year yield rose 15.31 basis points to 4.8121%, the 10-year gained 12.55 basis points to 4.9875%, and the 30-year increased 9.42 basis points to 5.3502%. The 10-year yield briefly moved above 5% before retreating below that level late in the session.
The Treasury sold $42 billion of 10-year notes that day at a 5.02% auction yield, one basis point above the pre-auction trading level. The bid-to-cover ratio was 2.46, below the 2.60 average. Direct bidder demand was strong, but indirect demand was weaker and primary dealers took a relatively large share. The auction did little to ease upward pressure on yields.
The larger rise at the short end of the curve pointed to a shift in expectations for the Fed’s next several meetings, rather than a repricing driven solely by longer-term inflation risk. Higher expected short-term rates also helped set the day’s direction in foreign exchange, supporting the dollar.
Core inflation beats forecasts as energy gains cool
Headline CPI rose 0.4% in October from a month earlier, above the 0.3% forecast but slower than September’s 0.6% increase. Core CPI advanced 0.3%, exceeding expectations of 0.2%. On a rounded basis, the monthly core increase has held at 0.3% for three straight months.
The report did not include year-over-year readings because the prior year’s government shutdown left the relevant October 2025 comparison data unavailable. In September, headline and core CPI were up 3.7% and 2.6%, respectively, from a year earlier.
Energy prices rose 0.7%, well below September’s 5.2% increase, helping to slow the monthly pace of headline inflation. Shelter costs gained 0.3% and accounted for more than 30% of the overall CPI increase, while food prices rose 0.5%. Motor vehicle insurance increased 0.7%, airfares rose 0.4%, and used-car prices fell 1.2%. Core services excluding shelter were estimated to have risen about 0.4%.
The slowdown in energy inflation did not erase the signal from persistent core price increases. Core CPI’s unrounded monthly rise was 0.297%, close to the 0.3% threshold Waller had cited. Before the December policy meeting, markets will also have October’s personal consumption expenditures (PCE) price index and November employment data to assess. The PCE index is the Fed’s preferred inflation measure, while jobs data will help show how much scope there is for further tightening.
Fed officials weigh persistent inflation and further hikes
Before the CPI report, Waller said he still supported a 25-basis-point increase in December even if October inflation improved. If core CPI came in at 0.3% or higher, however, he was willing to consider a 50-basis-point hike. He described the labor market as broadly balanced and said he was watching whether price increases had spread to more goods and services, as well as whether higher energy costs were feeding through to other prices.
Fed Governor Michelle Bowman said after the release that the report suggested inflation pressures could persist for longer and that labor-market conditions appeared to be tightening. She said policymakers would need to review October PCE and November employment data before deciding in December, while also assessing whether demand related to artificial intelligence could be sustained and how geopolitical risks might affect the economy.
Kansas City Fed President Jeff Schmid said policy was currently quite accommodative. He said interest rates appeared to be having some effect in housing, but that restraint was less evident elsewhere, and pointed to price trends beyond energy that merited attention. Dallas Fed President Lorie Logan said at least two more 25-basis-point hikes were needed, with the possibility of moving faster this winter. After those two increases, the Fed could pause to assess economic conditions, she said. Logan also said rising bond yields showed there was still more work for monetary policy to do.
The officials all focused on inflation but emphasized different considerations: Waller discussed the size of a December move, Logan called for at least two more hikes, Schmid questioned how restrictive policy was, and Bowman highlighted data that had yet to arrive. The sharp jump in the two-year yield showed that markets were taking the possibility of a faster tightening pace seriously.
Stocks give back early gains as metals and crypto fall
US stocks closed lower after losing early gains. The Dow Jones Industrial Average fell 0.30% to 52,237.23, the S&P 500 slipped 0.38% to 7,520.93, and the Nasdaq Composite dropped 0.74% to 20,065.87. The Russell 2000 declined 0.68% and the Nasdaq 100 fell 0.60%. Anthropic’s IPO roadshow and updated offering terms briefly lifted technology shares earlier in the session, but those gains did not hold.
Anthropic and selling shareholders plan to offer 825 million shares at $70 to $78 apiece, for a deal worth up to about $64.4 billion and a potential valuation of up to $1.4 trillion. The company had previously withdrawn preliminary figures sent to underwriting banks. The shares are expected to list on Nasdaq on November 19 under the ticker ANT. Subscription demand will offer investors a gauge of appetite for AI exposure, while rising yields are raising the valuation hurdle for growth stocks.
Most European markets finished higher: Spain’s IBEX 35 gained 0.98%, Italy’s FTSE MIB rose 0.69%, France’s CAC 40 added 0.55%, and Germany’s DAX advanced 0.31%. The UK’s FTSE 100 fell 0.29%.
In commodities, WTI crude slipped 0.56% to $86.36 a barrel after touching an intraday low of $83.88. Brent fell 0.67% to $91.95. Gold dropped 2.59% to about $4,032 an ounce and silver lost 3.54% to $51.52. Bitcoin declined 1.42% to around $73,881, while ether fell 3.18% to $2,059.42. A stronger dollar and rising Treasury yields weighed on precious metals.
October PCE inflation and November employment figures will add to the information available ahead of the Fed’s December decision. For markets, the key questions are whether core inflation remains elevated and whether labor-market conditions leave room for a faster or larger rate increase.