Dollar Firms as Markets Brace for Fed Rate Decision Amid Inflation Worries
The US Dollar Index (DXY) has gained to 99.60 mark on Tuesday due to higher bond market yields and inflation worries, driven by a near 4% jump in Oil prices.
Markets are pricing in a roughly 92% chance of the Federal Reserve raising interest rates on Wednesday, its first hike since 2023. However, the reaction will hinge less on the decision itself than on the updated economic projections and Chair Kevin Warsh's guidance on further tightening.
The US Retail Sales data earlier today set the tone for the day's trading, with the US Dollar (USD) being the strongest against the Japanese Yen. The EUR/USD pair drifted lower through the session, hovering near 1.1540s as the firmer USD kept it pinned before the Fed decision.
The West Texas Intermediate (WTI) Oil price extended its rally, changing hands above $105 per barrel on Middle East supply worries, which revived inflation concerns just as the Federal Reserve prepares to decide on rates.