Dollar Strengthens as Fed Rate Hike Looms

The US dollar has opened the week strong, catching up to supportive domestic and external developments. The Federal Reserve is likely to raise interest rates by 25 basis points on Wednesday, with a nearly unanimous consensus among economists.

Last week's hotter-than-expected CPI print has all but sealed a rate hike, and markets are pricing in a 22 basis point increase. This may limit the dollar's upside on the day, but it still has room to catch up with higher front-end rates.

Externally, oil prices have risen again today after Saudi Arabia shut its East-West pipeline following drone attacks from Iraq. The pipeline is critical for roughly 7 million barrels per day of exports, adding pressure to already fragile risk sentiment.