Markets price 44 bps of Fed rate hikes this year as Treasury yields climb, lifting the US Dollar Index ahead of next week’s FOMC meeting.
The US Dollar Index (DXY) rose 0.3% to 101.44 as Treasury yields extended gains, driven by shifting Federal Reserve rate expectations. Markets now price 44 bps of cumulative Fed tightening for 2024, with a 25bps hike in September fully priced after briefly paring bets following softer June CPI data.
The 2-year Treasury yield climbed 5bps to 4.35%, its highest since early 2025, while the 10-year yield added 4bps to 4.69%. These moves reflect renewed hawkish repricing as investors await clarity from next week’s FOMC meeting, where Chair Kevin Warsh’s guidance will be closely watched.
The Fed’s response to market expectations—whether validating or pushing back against further tightening—could determine the dollar’s next move. Volatility in rate expectations remains elevated as traders balance inflation data against growth concerns.