The US dollar retreated from its 18-month high against the euro on Wednesday, as investors awaited US inflation data and comments from Federal Reserve officials for fresh clues on the pace of monetary policy tightening.

The euro rose slightly after European Central Bank President Christine Lagarde dashed expectations of the bank intervening to support the battered French bond market, but gains in the European currency were limited by Brent crude prices rising to $106 a barrel.

Attention is now focused on US consumer price index data, along with speeches from Federal Reserve officials that may provide clearer indications of the path of interest rates.

Economists polled by Reuters expect the consumer price index to rise 0.6% month-on-month in September, after a 0.4% increase in August, while annual inflation is likely to accelerate to 3.6%, compared to 3.4% in the previous month.

The dollar index, which measures the performance of the US currency against a basket of major currencies, fell by 0.05% to 102.15 points, coinciding with a slight decline in US Treasury bond yields.

The dollar also fell on Tuesday, following comments interpreted as leaning toward monetary easing from the president of the Federal Reserve Bank of New York, John Williams, and Federal Reserve Governor Christopher Waller.

“I don’t think I have any reason at the moment to believe that we will need to take further action,” Williams said in an interview with Bloomberg News, referring to the possibility of raising interest rates again in 2027.

The CME Group’s FedWatch tool showed traders pricing in a 78% probability that the Federal Reserve will keep interest rates unchanged at its meeting on October 27-28, up from 53% a month earlier, while pricing in a cumulative monetary tightening of about 79 basis points by late 2027.

The US Federal Reserve raised its key interest rate by a quarter of a percentage point last month, to a range between 3.75% and 4.00%.

Federal Reserve officials Thomas Barkin and Michelle Bowman are scheduled to speak later on Wednesday, and the bank will also release its monthly report known as the Beige Book, which reviews economic conditions in the United States.

Euro under pressure amid concerns over French debt

A number of top global financial officials are meeting in the Thai capital, Bangkok, where the International Monetary Fund and the World Bank are holding their annual meetings.

French bonds were among the assets hardest hit by the recent global sell-off, as investors worried that political wrangling ahead of next year's presidential election could derail efforts to reduce the country's high fiscal deficit.

Speaking at a CNN event in Bangkok, Lagarde said that France must address its debt problems by getting its public finances in order, which reduced speculation about the European Central Bank potentially buying French bonds to control their rising yields.

The euro rose 0.06% to $1.1205, after hitting a 17-month low against the dollar earlier in the week, amid rising French borrowing costs and escalating inflation concerns stemming from higher energy prices.

In Britain, the Financial Times reported on Wednesday that British Finance Minister John Healey is expected to fund all the new measures included in this month's budget through tax increases or spending cuts, rather than resorting to further borrowing.

In contrast, a senior official at the International Monetary Fund said that the Fund does not recommend that Britain accelerate the pace of its fiscal consolidation.

The British pound rose 0.08% to $1.3265, while the Japanese yen edged up 0.03% to 158.395 yen against the dollar.