Geopolitical risks and stronger-than-expected US inflation data lift the dollar, dimming Fed rate cut expectations for 2024.
The US Dollar Index steadied at 98.30 in Asian trading, consolidating two days of gains amid heightened Middle East tensions and robust inflation data. President Trump’s warnings of potential conflict with Iran and Tehran’s unyielding stance on sanctions and sovereignty kept markets cautious.
April’s Consumer Price Index rose 0.6% month-over-month, pushing annual inflation to 3.8%, the highest since May 2023. Core CPI climbed 2.8% year-over-year, reinforcing expectations the Federal Reserve will maintain elevated rates. Markets now price in a December rate hike, abandoning earlier bets on cuts.
Investors await upcoming producer inflation data for further clues on monetary policy. The dollar’s resilience reflects its safe-haven appeal and shifting Fed outlook.