Dollar Soars on Oil Price Uncertainty, Fed Hike Expectations
The US dollar has continued its upward trend as oil prices remain high due to ongoing tensions in the Middle East and mixed rhetoric from President Trump. Oil spot prices have risen by around 5% from last week's trough, with repeated Iranian attacks on ships crossing the Strait of Hormuz and fresh attacks by Houthi rebels on Saudi Arabian targets contributing to the increase.
Trump's rejection of Iran's proposals to reopen the Hormuz Strait has further fueled uncertainty, while reports that he may resume military operations after the midterm elections could keep oil prices elevated. The dollar has benefited from rising yields and negative newsflow from the eurozone, with bond yields continuing their upward trend due to an increased inflation premium.
The Fed's potential for a rate hike is also on investors' minds, with 38bps of tightening priced in by year-end. Gold and Bitcoin are feeling the heat, with gold trading below $4,200 for the first time since early August and Bitcoin searching for support after reaching its highest level since January.