Dollar Soars to Two-Month High Amid Global Economic Uncertainty
The US dollar has reached its highest level since late July, climbing for seven straight sessions and gaining over 2%. The greenback's surge is attributed to a strong domestic economy, big tech momentum, and a tighter monetary policy outlook. Political risk has weighed on European currencies, while the yen has fallen in seven of the past eight days due to divisions within the Bank of Japan regarding its policy stance.
The Federal Reserve's hawkish stance has led commentators to suggest that inflation could be lifted via second-round effects from the Middle East conflict and elevated energy prices. This implies that the Fed may need to continue tightening, with futures implying a 54% chance of an October rate rise and a 40% probability of two additional increases in 2026.
Markets are pricing an over-81% chance of a Bank Rate move from 3.75% to 4% in November in the UK, even as GBPUSD slips ahead of a budget proposal. In France, public debt is expected to exceed 120% of GDP by 2027, with debt-servicing costs set to double by decade-end.