Dollar Finds Support in Inflation as Rate Hike Bets Decline

The US Dollar (USD) has been affected by a mix of geopolitical risks and economic indicators in recent weeks. The possibility of a US-Iran peace agreement has receded, but expectations for Federal Reserve rate hikes have also declined after a weak jobs report.

Federal Reserve officials maintained a hawkish tone this week, citing persistent inflation as a reason to keep interest rates higher for longer. While some officials favored holding rates steady, others signaled that additional tightening may be necessary if price pressures persist.

The US Dollar Index (DXY) retreated to its lowest level in seven weeks before recovering somewhat, while US Treasury yields also drifted lower. The market's focus will shift next week to the Consumer Price Index report, which could provide a key catalyst for the dollar and shape expectations for Fed policy.