FX.co ★ Dollar Strengthens on Fed Rate Hike Bets

The dollar index rose above 99.3 on Monday, marking its highest level in six weeks, as mounting inflationary pressures tied to the Middle East conflict bolstered expectations that the Federal Reserve may raise interest rates later this year. In the latest developments, President Donald Trump warned Iran to “get moving” or face consequences after leaving China without securing major trade agreements or meaningful progress toward resolving the conflict and reopening the Strait of Hormuz. Fresh US CPI and PPI figures released last week showed that the energy price shock is feeding into broader inflation, prompting traders to completely discount the possibility of Fed rate cuts this year and increasing the odds of a rate hike before year-end. Investors are now looking ahead to the latest FOMC meeting minutes and flash US PMI readings for further insight into the trajectory of monetary policy and overall economic activity.