$USD Reaches Two-Month High as Markets Anticipate More Rate Hikes

The US dollar continued its upward march on Wednesday, reaching its highest level in two months. The greenback's strength was driven by expectations of further interest rate hikes from the Federal Reserve to combat persistent inflation.

Short-end rate markets are pricing in a 55% probability of a follow-up rate hike in October, following last week's hawkish monetary tightening. This has led to a 0.2% advance for the dollar against its major counterparts.

The euro was hit particularly hard, falling 0.3% and reaching its weakest levels since late July. The currency is under pressure from both hawkish Fed expectations and domestic political friction in the Eurozone.

Elias Haddad, global head of markets strategy at Brown Brothers Harriman, noted that US economic outperformance should keep the dollar supported. He pointed to upcoming PMI readings, which are expected to show the US maintaining its growth edge over other major economies.