Dollar Index Hits Eight-Day High on Inflation Data, Rate-Hike Bets Skyrocket

The US dollar index has reached an eight-day high following fresh inflation data showing persistent price pressures. The latest Personal Consumption Expenditures (PCE) price index rose 0.2% month-over-month, exceeding the 0.1% consensus estimate.

Markets now expect a 44% probability of a September rate hike, up from roughly 36% before the data release. This has fueled rate-hike bets and contributed to the dollar's rebound potential.

The US Dollar Index rose as much as 0.21% to 99.13 in early Thursday trading, its highest since August 19. Westpac economist Ryan Wells noted that Fed Chair Kevin Warsh's upcoming speech at the Jackson Hole Economic Symposium will be a critical test of whether market rate-hike expectations can be sustained.

Markets are watching for clear policy signals from Warsh, as traders have become less responsive to traditional economic indicators due to his shift in policy stance. The dollar's near-term direction is closely tied to the outcome of this speech.