DXY Breaks Above $99.26 as ECB Hike Odds Boost US Dollar

The US Dollar has strengthened against major currencies following recent decisions from central banks. The European Central Bank (ECB) raised interest rates by 25 basis points, its second increase this year, in response to rising energy prices and inflation. This move initially sent the EUR/USD pair lower as investors reassessed their expectations for economic growth and income risks. However, renewed market attention on Fed rate hike odds has boosted the US Dollar Index (DXY), which has broken above $99.26 with a focus on reaching $99.39.

The European Central Bank's decision is likely to be closely watched by investors, particularly in light of upcoming speeches from President Lagarde and her colleagues. These speeches will provide insight into the ECB's future policy decisions and may influence market expectations for interest rates. In contrast, the Bank of England meeting this Thursday is expected to result in a status quo decision, with 75% of participants predicting that policymakers will stand pat on interest rates.

The ongoing conflict in the Middle East continues to impact oil prices, which are driving inflation in the UK and narrowing policy divergences between the BoE, Fed, and ECB. This has led to increased demand for higher-yielding assets, but market participants remain cautious due to potential ruptures in the global energy market.