Investors price in over 50% odds of a Fed rate hike by December as inflation fears surge amid geopolitical uncertainty.
The U.S. dollar index rose to 99.47, its highest since April 7, as markets reassessed inflation risks tied to the Iran conflict and potential Fed tightening. The index is up more than 1% in May, driven by safe-haven demand and shifting rate expectations.
The euro dipped to a six-week low of $1.158 before stabilizing, while the British pound held near $1.3401. U.S. 30-year Treasury yields hit their highest level since 2007, reflecting a global bond selloff. Traders now see a 50%+ chance of a Fed hike by December, a sharp reversal from earlier expectations of cuts.
The Australian dollar, a risk barometer, rose 0.3% after Tuesday’s 0.9% drop. Focus shifts to the Fed’s meeting minutes due later, which may offer clues on policy direction amid rising inflation concerns.