Dollar Gains Momentum as Fed Decision Looms

The US dollar is expected to gain strength due to a more hawkish Federal Reserve scenario ahead of its July meeting. The market is pricing in nearly a 38 percent probability of a rate hike, with expectations shifting toward a more aggressive monetary policy. Analysts at Citadel Securities suggest the Fed may raise rates to reinforce Chair Kevin Warsh's reputation as an inflation fighter.

The euro, on the other hand, is consolidating near its monthly low due to uncertainty surrounding the FOMC meeting outcome. The single currency found some support from Germany's improving business climate, but any recovery attempt in the pair is likely to be met with selling until clearer signals emerge from the Fed.

Oil prices are being driven by tensions in the Middle East, with a pause in strikes contributing to reduced inflation risks and a slight cap on dollar gains. The situation remains uncertain, with key questions surrounding how long the pause will hold and when shipping through Hormuz will normalize.