Dollar Soars on Energy Shock Concerns, Euro Falls

The US dollar reached a seven-week high on Wednesday as investors turned to the greenback amid growing concerns about the economic impact of the energy shock. The dollar index rose 0.11% to 99.76, with the euro down 0.16% at $1.1575.

According to George Brown, senior economist at Schroders, 'we expect the ECB to finish its hiking cycle by the end of the year, while the Federal Reserve will likely be just beginning to raise rates.' This divergence in monetary policy paths is expected to widen rate differentials in favor of the dollar and lead to a weaker euro.

However, concerns about inflation and the country's fiscal trajectory can weigh on the dollar. The yield on the benchmark US 10-year note rose to as high as 4.812%, its firmest since November 2023, before retreating to 4.804%.