Dollar Hits Two-Month High as Inflation Expectations Rise
The US dollar index rose to a two-month high on Monday, climbing by 0.20%. This increase in the DXY is largely attributed to rising T-note yields and fading hopes for an imminent end to the US-Iran war. The ongoing conflict has kept crude prices elevated, which in turn has prompted higher inflation expectations.
However, dollar gains are tempered by weaker-than-expected US economic news on August's JOLTS job openings and September's consumer confidence. Additionally, a 1% decline in WTI crude oil eased inflation expectations and is considered dovish for Fed policy.
The US July S&P composite-20 home price index saw a 0.3% monthly increase and a 2.47% annual gain, exceeding expectations. Conversely, the Conference Board's September consumer confidence index fell to a 12-year low of 81.9, missing forecasts of 89.0.
The market is pricing in a 68% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28. Meanwhile, the EUR/USD exchange rate is up by 0.01%, and the yen has little changed today.