Dollar Rises After ECB Rate Hike as Markets Eye Crucial CPI Report

The dollar rebounded on Thursday as investors responded to the European Central Bank's decision to raise interest rates by 0.25 percentage points.

This move knocked the euro lower, with its value falling to around $1.1612 as traders looked past the hike and focused on the potential economic drag of higher borrowing costs.

In the US, producer-price inflation came in line with expectations, which has kept markets leaning towards a Federal Reserve rate hike next week. This would likely help support the dollar index, which rose to 99.06.

However, all eyes are on Friday's consumer inflation (CPI) report, as a hotter print could spark a short-term 'relief rally' in the dollar, according to Bank of America strategist Alex Cohen. But lasting strength would require 'Fed follow-through' that confirms a higher-for-longer path.