Dollar Gains as Gulf Tensions Rise, US Inflation Data in Focus
The US dollar gained ground on Wednesday as investors sought safe-haven assets due to rising tensions in the Gulf region. The dollar's strength was also fueled by expectations of a potential interest rate hike by the Federal Reserve, which could be influenced by upcoming economic data.
Oil prices increased after separate attacks were reported on shipping in the United States and Yemen, led by Iran-aligned Houthis. This development has heightened concerns about an energy shock from the Iran war, causing investors to buy into safe-haven assets like the dollar.
Friday's soft US jobs data did not have a significant impact on the greenback, as markets anticipate that inflation will be the key driver of the Fed's policy trajectory. This view was echoed by Fed Bank of Chicago President Austan Goolsbee, who stated that he is more concerned about high inflation than labor market weakness.
Economists expect US inflation data due later on Wednesday to show a pickup in prices last month after easing in June. This could further support the notion that the next Federal Reserve interest rate move will be driven by inflation concerns.