DXY Strengthens Above 99.50 on Rising Fed Rate Hike Bets

The US Dollar Index (DXY) has strengthened above 99.50 as expectations of a Federal Reserve interest rate hike on Wednesday rise.

Markets are increasingly convinced that the Fed will hike rates in response to the jump in energy prices, which has pushed underlying inflation higher than expected in August.

According to the CME FedWatch tool, money markets point to a roughly 92.4% chance of a rate increase, up from around 60% a week ago.

UBS analyst Giovanni Staunovo noted that 'Markets are now fully pricing in a Fed rate hike following last week's CPI data. At the same time, the renewed rise in oil prices could reinforce inflation concerns and keep the Fed on a hawkish footing.'