Dollar Edges Higher on US Inflation Data, Fed Rate Hike Expectations Soar

The US dollar rose after data showed a 0.4% increase in consumer prices in August, reinforcing expectations of a rate hike by the Federal Reserve next week.

The Labor Department's report on inflation indicated that the core Consumer Price Index (CPI) increased 2.4% year-over-year in August, up from 2.5% in July.

Juan Perez, director of trading at MonexUSA, noted that 'the main thing we're looking at is core CPI, which seems to be accelerating.'

This acceleration increases the probability of a rate hike by the Federal Reserve, which markets are now pricing in at around 86%, up from 72% a day earlier.