DXY Gains Momentum on Hawkish Fed Signals and Interest Rate Hike

The US Dollar Index (DXY) has gained momentum and is trading near 100.45 in early European trading hours on Tuesday. This strength comes as a result of hawkish signals from the Federal Reserve (Fed), particularly after its rate hike last week.

On September 20, the Fed raised its benchmark interest rate by 25 basis points, bringing the target range to 3.75% to 4.00%. In a press conference following this decision, Fed Chair Kevin Warsh emphasized that 'the plain fact is that inflation is too high and has been for too long.' He added that 'we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.'

Traders are now pricing in roughly 56.5% odds for a rate hike of at least 25 basis points at the Fed's October meeting, according to the CME FedWatch tool.