Dollar Rises Ahead of Trump-Xi Summit on Hawkish Fed Expectations

The US dollar continued its upward trajectory on Wednesday, reaching its highest level in two months. The Fed's hawkish monetary tightening has led to expanding bets that additional interest rate hikes will be implemented to combat persistent inflation.

Currency markets consolidated near key thresholds ahead of the high-stakes US-China summit between President Xi Jinping and President Donald Trump.

The euro fell 0.3%, languishing at its weakest levels since late July, due to a combination of hawkish Fed expectations and domestic political friction.

Elias Haddad, global head of markets strategy at Brown Brothers Harriman, noted that US economic outperformance should keep the dollar supported, despite tightening by other major central banks limiting policy divergence with the Fed.