Dollar Consolidates Rally Amid Middle East Tensions

Financial markets are adopting a cautious stance as investors assess shifting odds of a Federal Reserve interest rate hike in September and re-escalating tensions in the Middle East. Preliminary August inflation data from Germany is due later today.

The US Dollar (USD) has been consolidating its Fed-inspired rally, with the USD Index staying above 99.50 in the European morning on Monday. This comes after a high of over 99.70 on Friday, which was the strongest level seen in two weeks.

Fed Chair Warsh's remarks at the Jackson Hole Symposium on Friday sparked a more hawkish tone, with the FXS Speechtracker score reaching 7.4 versus its historical average of 6.5. The insistence that 'we have work to do' on prices and financial conditions far from restrictive suggest a bias towards keeping policy tight or tightening further if inflation progress stalls.

Crude Oil prices are rising today, with the barrel of West Texas Intermediate up about 1.5% at around $84. This comes after US military strikes against Iran over the weekend, which have put pressure on global markets.