US labor market resilience boosts USD, lifting Fed rate hike probability to 41.9% by year-end amid inflation concerns.
The US Dollar Index (DXY) rose to 99.25 in early Asian trading Friday, supported by stronger-than-expected US labor data. Weekly jobless claims fell, signaling labor market strength and reducing pressure on the Federal Reserve to ease policy amid persistent inflation.
Markets now price a 41.9% chance of a 25 basis point Fed rate hike by year-end, up from earlier expectations. The shift follows disrupted energy markets and geopolitical tensions, including stalled US-Iran negotiations over the Strait of Hormuz.
Investors await the May Michigan Consumer Sentiment Index report later Friday. Fed leadership transition remains in focus as Jerome Powell’s term ends, with Kevin Warsh set to take over pending a swearing-in ceremony.