FX.co ★ Dollar Towers on Fed Rate Hike Bets

The dollar index hovered near 100 on Monday after gaining more than 1% last week, bolstered by strong US labor market data that reinforced expectations of a Federal Reserve interest rate hike later this year. Data released on Friday showed the US economy added 172,000 jobs in May, well above the consensus forecast of 85,000, while the unemployment rate held steady at 4.3%. In response, markets increased the implied probability of a Fed rate hike in December to nearly 70%, up from about 50% before the report. Even so, the central bank is still widely expected to keep interest rates unchanged at its June 16–17 policy meeting under new Chairman Kevin Warsh. Expectations of a more hawkish Fed stance were further underpinned by renewed tensions in the Middle East, which pushed oil prices higher and heightened inflation concerns.