Brent crude at $80 and geopolitical tensions support Fed rate hike scenarios, keeping the USD firm against low-yielding currencies.
Higher oil prices and escalating Gulf tensions have reinforced expectations of Federal Reserve hawkishness, pushing the US Dollar Index (DXY) toward 101.50. Brent crude briefly touched $80 per barrel, amplifying concerns over persistent inflation and delaying potential rate cuts.
The FOMC minutes from the June meeting revealed two equally plausible scenarios: a delayed rate cut if inflation eases or an immediate hike if price pressures persist. Markets showed little reaction to the minutes, awaiting further Fed guidance next week.
ING analysts expect the dollar to remain supported on dips, particularly against low-yielding currencies, as energy prices fuel inflation concerns. Emerging market carry trades have also unwound amid the shift in sentiment.