Dollar Pulls Back but Remains Elevated Amid Fed Rate Hike Expectations

The US dollar is experiencing a slight pullback on Friday but remains at elevated levels after reaching a three-week high on Thursday. The surge in energy prices has boosted expectations for the Federal Reserve to raise interest rates, with a 33% chance of a 25 basis point hike on July 29 and full pricing of a move by September, according to LSEG.

The growing Middle East conflict is lifting energy prices, despite oil stabilizing somewhat on Friday. The US military completed its 13th consecutive night of strikes on Iran late Thursday. As a result, the DXY dollar index fell 0.1% to 101.384, pulling back only marginally from the high of 101.544 reached on Thursday.