Dollar Gains on Hawkish CPI Report, Rate Hike Odds Jump to 88%

The US dollar index (DXY) rose by +0.06% on Friday as a hawkish US CPI report increased the odds of an FOMC rate hike next week to 88%, up from 75% on Thursday.

The report showed that August's core Consumer Price Index (CPI) was slightly stronger than expected, at +0.3% month-over-month and +2.4% year-over-year, both of which were in line with market expectations but marked a new 5.5-year low for the latter.

The dollar found support from the higher interest rate differentials after the 10-year T-note yield rose by +0.6 basis points.

However, the US consumer sentiment report from the University of Michigan fell short of expectations, with a preliminary September reading of 47.8, down from 51.7 in August.