Dollar Rises as Fed Hike Odds Jump and Oil Prices Soar
The US Dollar Index has maintained its gains near 101.50 due to revived hawkish Federal Reserve bets. According to the CME FedWatch tool, the odds of an interest rate hike in the policy meeting next week stand at 35.8%, significantly higher than last week's 11.8%. This uptick in Fed officials' expectations has boosted the US Dollar's value.
The closure of the Bab el-Mandeb Strait and the Strait of Hormuz has disrupted 27% of global energy supply, leading to a spike in oil prices. WTI Oil is trading around $90.60, close to its six-week high of $92.25 posted on Thursday. Higher oil prices typically contribute to inflation expectations, which could deter the Fed from implementing loose monetary conditions.
US President Donald Trump has warned that Washington would hold Iran responsible for the actions of the Yemen-based Houthis and that both Iran and its Houthi allies would receive a 'major military punishment' soon. The ongoing diplomatic tensions between the US and Iran suggest that supply shocks could persist in the market.