Last updated: September 30, 2026 · By the FXPayback Research Desk
Quick answer: Not dead, but badly wounded. August core PCE rose just 0.2% on the month and 3.0% on the year, below the 3.3% forecast. Add the weakest consumer confidence since 2014, and markets now price an October hike at roughly a coin flip or less, down from about 71% a week ago.
A week ago the October hike looked all but certain. Now? Traders in Jakarta, Kuala Lumpur and Karachi are waking up to a very different dollar story, and a lot of them are asking us the same thing: was the whole “Fed hikes again” trade just priced out in two days?
Here’s what changed, with the numbers.
What did the PCE report actually show?
The Fed’s preferred inflation gauge came in softer than expected. Core PCE rose 0.2% in August against a 0.3% forecast, and the annual rate held at 3.0% versus the 3.3% the market expected, according to DailyForex. Part of that is revisions: July’s core figure was cut from 3.3% to 3.0%, and headline PCE was revised down to 3.4% from 3.7%, per Benzinga.
That matters. Oxford Economics said the changes were “well telegraphed” and Fed officials will have accounted for most of them already. So this isn’t a clean “inflation is beaten” signal. It’s a “the Fed has less reason to rush” signal.
Why did October Fed rate hike odds fall so fast?
Because PCE landed on top of a bad Tuesday. The Conference Board’s consumer confidence index fell to 81.9, the lowest since 2014, and August job openings came in at 7.079 million versus 7.23 million expected, according to The Rio Times.
Different trackers give slightly different numbers, but they all point the same way:
- CME FedWatch: 52.9% chance of a hold in October, 47.1% for a 25 bp hike, per Phemex.
- Benzinga’s read: October hike odds at 37.1%, down from 70.9% the week before.
- Fed speakers: New York Fed President Williams said there’s “no need for urgency,” while Governor Barr still thinks more tightening is likely, per DailyForex.
Remember the backdrop. The Fed already hiked 25 bp in September, taking the target range to 3.75–4.00%, according to MUFG Research. The next meeting is October 27–28. And December is still live: FedWatch shows only a 10% chance rates are unchanged by year-end.
What does this mean for gold, the dollar and EUR/USD?
Gold got the first bounce. It jumped about 1.4% to $4,185 on Tuesday after the weak data, then gave some back on Wednesday to trade near $4,152. It’s still down around 6.5% over the month, per Trading Economics. Why hasn’t it ripped higher? Because the 10-year Treasury yield actually rose to 5.30% on Wednesday. Lower hike odds help gold. Yields above 5% still hurt it.
| Market | Latest level | What it’s telling you |
|---|---|---|
| Gold (XAU/USD) | ~$4,152 (Sep 30) | Relief bounce, but no trend change yet |
| US 10-year yield | 5.30% (Sep 30) | Long-end pressure hasn’t eased |
| Dollar Index (DXY) | 101.37 (Sep 29, two-month high) | Dollar strong, but momentum slowing |
| EUR/USD | 1.1135 (Sep 30) | Bouncing off a one-year low |
| Brent crude | ~$103 (Sep 30) | Off the highs after SPR release news |
Sources: Trading Economics, Benzinga, The Rio Times, DailyForex.
Oil is the wildcard. Brent fell 2.6% to $102.59 on Tuesday after a US Strategic Petroleum Reserve release was announced. But US–Iran talks in New York, mediated by Qatar, remain stuck. Iran’s foreign minister said there’s been “no change in Iran’s position,” per Al Jazeera. If Hormuz headlines push oil back up, hike odds come right back.
For Asian currencies, a softer dollar is a small gift. The rupiah only just broke past 18,000 per dollar on Tuesday, so any easing in Fed pricing gives Bank Indonesia some breathing room.
What are the key levels and takeaways before Friday’s jobs report?
- Gold $4,100–4,115: this week’s low zone. Lose it and the September sell-off probably resumes.
- Gold $4,190–4,200: first resistance. Tuesday’s rally stalled right under it.
- DXY 101.40: the two-month high. A break above says the market is re-pricing a hike.
- Friday’s non-farm payrolls: the real decider. ADP showed 90,000 private jobs in September, above forecasts. A strong NFP could flip odds back toward a hike in one candle.
A candid caution: odds that swing 30 points in a week can swing back just as fast. Spreads widen on NFP, stops get skipped, and slippage is real. Size down and work out your lots with our position size calculator before the release, not after.
How can you cut trading costs in a headline-driven Fed week?
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Frequently Asked Questions
Will the Fed raise rates in October 2026?
It’s now close to a coin flip or lower. After the softer August PCE report, CME FedWatch showed about 47% odds of a 25 bp hike at the October 27–28 meeting, down from roughly 71% a week earlier. Friday’s jobs report could move that sharply.
What was the August 2026 core PCE number?
Core PCE rose 0.2% month-on-month and 3.0% year-on-year, below forecasts of 0.3% and 3.3%. July’s figure was also revised down from 3.3% to 3.0%.
Why didn’t gold rally more after the soft PCE data?
Because US 10-year yields rose to 5.30% on the same day. Lower hike odds support gold, but high bond yields make a non-yielding metal less attractive, so the two forces partly cancelled out.
How can I lower my trading costs during volatile news weeks?
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Risk disclaimer: Trading forex, gold and CFDs involves significant risk and you can lose more than your deposit. This article is for information only and is not financial advice.