Traders now price over 85% probability of a Fed quarter-point hike by September amid resilient U.S. economic data.
The U.S. dollar index rose to 101.25, its highest level since May 2025, as markets priced in elevated chances of a Federal Reserve rate hike. Fed funds futures reflect an 85% likelihood of a 25-basis-point increase by September, driven by stronger-than-expected economic resilience.
The euro fell to $1.1395, its lowest since August 2025, after ECB President Christine Lagarde downplayed inflation concerns, signaling a cautious policy stance. The British pound dipped 0.2% to $1.3223, paring earlier gains following political uncertainty in the UK.
Analysts cited persistent geopolitical risks and Fed hawkishness as key drivers for the dollar’s strength, despite easing tensions in the Middle East and lower oil prices.