Dollar Hits Two-Month High as Interest Rate Hikes Loom

The US dollar has reached its strongest level in two months due to expectations of interest rate hikes. This has led to a decline in the euro and sterling against the dollar, with the euro falling to its lowest since late July and sterling down 0.3% at $1.3305.

Investors are anticipating further rate rises after several Federal Reserve officials signaled more policy tightening may be forthcoming if inflation does not subside quickly enough. ING strategist Francesco Pesole said that 'it's another sign that the Fed story is dominant, and the hawkish Fedspeak is enough to keep USD in demand.'

Oil markets remain a concern, with Brent crude futures rising 37% since the conflict erupted at the end of February. However, refined product prices are still high, with diesel costs reaching record highs in the US and multi-year highs in Europe.