The US Dollar Index stood at 101.3, pausing after a rally that peaked at a one-month high of 101.5 on July 23rd, as a modest pullback in energy prices tempered growing expectations that the Federal Reserve could raise interest rates this month. Even so, the index remained just 0.3% below the 15-month high reached in late June, reflecting a persistent consensus that the Fed is still likely to deliver a rate increase this year.
Concerns over energy-driven inflation had intensified after an escalation in the conflict between the US and Iran led to blockades of energy tankers in the Persian Gulf and the Red Sea, pushing up oil and fuel prices. These inflationary pressures were accompanied by robust economic data, giving the Fed additional room to maintain or increase rates. PMI figures from S&P indicated that private sector activity expanded at its fastest pace this year, while initial jobless claims recorded their sharpest weekly decline in nearly six decades, underscoring the continued strength of the labor market.
