The dollar index was little changed around 101 on Wednesday as investors weighed an escalation in Middle East tensions. President Trump declared that “as far as I’m concerned, the ceasefire is over” and threatened additional strikes on Iran as well as a blockade of the country’s ports. The US also carried out new strikes on Iran and revoked a waiver that had allowed Tehran to sell crude oil on global markets.
These moves followed a series of attacks in recent days on tankers transiting the Strait of Hormuz. Oil prices jumped again, reigniting concerns about inflation and the risk of renewed monetary tightening. In response, traders raised their expectations for Federal Reserve rate hikes, with the implied probability of a September increase climbing to about 69%, from 58% the previous day.
At the same time, minutes from the latest FOMC meeting indicated that policymakers remained divided over the future path of interest rates and had examined a broad range of potential economic scenarios.
