ING analysts cite rising energy costs and live Fed tightening prospects as key drivers for USD strength against low-yielding currencies.
The US Dollar remains supported by higher energy prices and geopolitical tensions in the Gulf, according to market analysts. US energy independence and expectations of Federal Reserve tightening are underpinning its strength, particularly against the Euro, Japanese Yen, and Swiss Franc.
Headline inflation is expected to decline in June’s CPI report, but rising energy costs and core inflation near 2.8-2.9% year-on-year suggest it is premature to rule out a Fed rate hike this year. The Dollar Index (DXY) is seen grinding toward 101.50, while USD/CHF may retest 0.8140.
Analysts note that persistent energy price increases and resilient US economic activity keep Fed tightening prospects alive. The Dollar is favored over low-yielding, energy-importing currencies in a higher-rate environment.