Markets price in 50% odds of at least one Federal Reserve rate increase by end-2026 after strong inflation data.
The US Dollar Index climbed 1.3% this week to 99.10, its largest gain in two months, as traders repriced Federal Reserve policy expectations. The move followed stronger-than-forecast consumer and producer inflation prints, pushing the 10-year Treasury yield above 4.5% for the first time in nearly a year.
Earlier data showed US Retail Sales rose 0.5% month-over-month in April, matching estimates, while Initial Jobless Claims increased by 12K to 211K in the week ending May 9. The CME FedWatch Tool now reflects a 50% probability of a Fed rate hike by year-end 2026.
US stock index futures fell 0.4% to 1% in early trading, signaling risk aversion amid the dollar’s rally. The greenback strengthened most against the British Pound this week.