Dollar Rises as Inflation Rekindles Rate Hike Fears

The US dollar and Treasury yields rose on Wednesday as investors digested hotter-than-expected inflation figures, which reignited speculation about an imminent interest rate hike from the Federal Reserve. The narrow trading ranges reflected a wait-and-see approach ahead of Nvidia's quarterly earnings release and Fed Chair Kevin Warsh's keynote speech at Jackson Hole later this week.

The Consumer Price Index (PCE) inflation measure, the Fed's preferred gauge, rose 0.2% in July, exceeding forecasts of 0.1%. The annual rate climbed to 3.7%, while core inflation, which strips out volatile food and energy prices, edged up to 3.6%. Despite these hotter readings, rate hike expectations remained stable, with traders still pricing in a 60-40 probability of a rise next month.

Corporate profits as a share of GDP reached new record highs in Q2, but consumer spending growth may not be enough to sustain those inflated margins, experts warn. The personal savings rate rose to 3.0% from 2.6%, suggesting consumers will increasingly rely on credit rather than savings in the coming months.