Investors boost odds of half-point Fed hike as core CPI rise meets Waller’s bar

Investors have increased the probability of a 50-basis-point Federal Reserve rate hike after a core CPI reading rose by an amount that satisfies the threshold Governor Christopher Waller has previously cited for supporting a larger move. The transmission runs through rate expectations: a higher implied path for policy rates widens the expected real yield advantage of dollar assets, drawing capital toward Treasuries and supporting the USD against major peers. The most exposed instruments are short-dated Treasury futures and fed funds contracts, where repricing is most direct, along with rate-sensitive equities and the dollar index, which tends to strengthen as hike odds rise. Traders will focus on the next scheduled Personal Consumption Expenditures release and the upcoming Fed speaker calendar, since confirmation of persistent core inflation in PCE data or fresh hawkish remarks from Waller would likely determine whether the repricing extends further.

The US Dollar (USD) is the world's primary reserve currency and the base for most forex majors. Headlines about Federal Reserve policy, US macro data (CPI, NFP, GDP), and Treasury yield shifts typically drive USD pair direction within seconds of release.

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