Overnight, while the US slept

Stocks pause for breath at quarter-end: US equities slipped on Wednesday. The S&P 500 closed at 7,651.54 (−0.3%), the Dow fell 0.9% to 50,906.05, and the Nasdaq Composite edged up 0.2% to 26,861.06. Early gains after the inflation report faded as strong growth data kept bond yields high. Europe's STOXX 600 was up as much as 0.7% midday (642.69) but is on course for a 1.5% drop in September, its first monthly loss in six. In Sydney, the ASX 200 jumped around 0.9% after August CPI came in a touch below forecasts.

Rates & DXY: The US 10-year yield eased about 4 basis points to roughly 5.22% after the inflation data (it touched 5.27% earlier in the week, a multi-decade high), and the 2-year slipped to around 4.87%. The 2s10s spread (10-year minus 2-year yield, which shows the shape of the curve) is about 35 basis points, so the curve is still modestly upward-sloping even with the Fed in tightening mode. The DXY (the dollar's value against a basket of major currencies) touched a two-month high near 101.5 and then backed off; the 101 area has been a sticky pivot for over a year.

August PCE was the main event: The Fed's preferred inflation gauge (core PCE, which strips out food and energy) rose 0.2% on the month and 3.0% on the year, against forecasts of 0.3% and 3.3%. Headline PCE was 0.3% on the month and 3.4% on the year, also below forecasts of 0.4% and 3.7%. Together with a low-ish jobs-openings number (7.08 million) and consumer confidence at its lowest since 2014 (81.9), the odds of a Fed hike in late October dropped to roughly 47%, from about 70% two days earlier. New York Fed president John Williams also said there was "no urgency" to make further changes. ADP private payrolls beat at +90,000 versus 70,000 expected.

Iran and oil keep inflation risk alive: Brent is around $102.6 (Wednesday's range roughly $99.8–$104.0) and WTI about $93.6. Oil flows through the Strait of Hormuz have recovered to roughly 80% of pre-war levels, but the strait is still effectively restricted, and indirect US–Iran talks are stuck on the sequencing of any reopening. That's the supply-side shock sitting underneath every central bank decision right now.

Gold: trading 4,157.04/4,157.25. Wednesday's range was 4,147.52–4,219.33 and Tuesday's was 4,113.40–4,185.27. Gold spiked to 4,219 on the soft PCE print, then gave the whole move back as the dollar recovered, and it is well below the 4,296 area it traded at on Friday. My read on the driver: this is a supply-side inflation shock (oil) meeting a central bank that has actually been raising rates, so real rates (interest rates after subtracting inflation) stay high and gold struggles. The soft PCE narrowed that channel a little, which is why the bounce happened, but it hasn't broken it.

Crypto: Bitcoin 83,692 (RSI M15 44.9, ATR about $188); Wednesday's range was $82,908–$85,629, with a spike to $85.6k on PCE that didn't hold. Bitcoin is still closing out its best quarter since 2024. Ether 2,680 (RSI M15 51.3, ATR about $8); Wednesday's range $2,654.85–$2,736.05, heading for its best quarter since 2021.

Key FX:

• EURUSD 1.1330 — RSI 41 (neutral-soft), ATR 3.8 pips (average 15-minute range). Wednesday's range 1.13224–1.13804 (58 pips). Hugging 16-month lows just above 1.1300 after Lagarde argued that higher bond yields are "doing the ECB's job" for it.
• GBPUSD 1.3269 — RSI 53, ATR 5.2 pips. Wednesday's range 1.32229–1.33110. Bounced with the dollar dip but fiscal worries and record diesel prices are a drag.
• USDJPY 157.35 — RSI 56, ATR 6.2 pips. Wednesday's range 156.377–157.539. Japanese officials talked the yen up on Tuesday (verbal intervention: warnings short of actual buying), and the market is pricing a Bank of Japan hike this month. The Tankan survey lands in a few hours.
• AUDUSD 0.6949 — RSI 46, ATR 3.2 pips. Wednesday's range 0.69426–0.69950. The RBA lifted rates to 4.60% on Tuesday (its fourth hike this year) but sounded less hawkish, and August CPI printed 4.0% annual versus 4.1% expected, with the trimmed mean (the underlying measure) steady at 3.6%. Still sitting near two-month lows.
• NZDUSD 0.5636 — RSI 49, ATR 3.2 pips. Wednesday's range 0.56303–0.56645. Grinding lower with the dollar firm.
• USDCHF 0.8345 — RSI 41, ATR 4.0 pips. Wednesday's range 0.83212–0.83619. Quiet.

Cross-asset snapshot:

Asset	Now	vs Prior Close	Vector
S&P 500	7,651.54 (Wed close)	−0.3%	Mildly risk-off, yields the brake
US 10Y	~5.22%	~−4 bp on the day, just off the 5.27% high	Less hawkish than Tuesday, still restrictive
DXY	~101.4	Backed off a two-month high near 101.5	USD firm but wobbling
Gold	4,157	About $62 below the PCE-spike high (4,219)	Bearish — supply shock with an open policy channel
Bitcoin	83,692	About $1,900 below Wednesday's spike high	Holding up; quarter-end strong
Brent	~$102.6	Inside Wednesday's 99.8–104.0 range	Elevated — Hormuz still the swing factor

It's the last day of the quarter's aftermath and China is on its Golden Week holiday, so Asian liquidity will be thin today. Thin books mean sharper moves on the US data tonight.

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