The US dollar index climbed toward 101.6 on Wednesday, approaching its highest level in 15 months, as expectations for a hawkish Federal Reserve coincided with weakness across major G10 currencies. Most market participants still anticipate at least one additional Fed rate hike this year, supported by evidence of a resilient labor market and rising core inflation.
ADP data showed that the US private sector added nearly 100,000 jobs in June—slightly below consensus forecasts but still comfortably above this year’s average—preserving room for the Fed to tighten policy further. The dollar also drew support from Fed Chair Warsh’s push to shrink the central bank’s balance sheet, which constrains dollar supply and contributes to the partial reversal of the earlier dollar-debasement trade.
Meanwhile, expectations for multiple ECB rate hikes this year were scaled back after softer-than-expected Eurozone inflation, and a fiscally cautious stance in Japan weighed on the yen.
