Dollar Stumbles Despite Rising Oil Prices and Rate Hike Expectations

The U.S. Dollar Index has fallen for three consecutive days despite rising oil prices driven by U.S.-Iran tensions and heightened rate hike expectations.

Rising oil prices have increased inflation expectations, with a 60% probability of a September rate hike according to the CME FedWatch Tool.

This trend appears contradictory as higher rate hike expectations should provide strong support for the dollar. However, the market has fully priced in these expectations, leading to a 'buy the rumor, sell the news' effect.

Traders remain cautious ahead of key data releases on Thursday and Friday, which will determine whether the dollar can regain upward momentum.