Dollar Rallies, Inflation and Iran Lead
The US dollar index strengthened to around 99 on Friday and is on track for a weekly gain of more than 1%. The rally was driven by rising inflationary pressures, reinforcing expectations that the Federal Reserve could consider raising interest rates in the second half of the year.
Data earlier this week showed US wholesale inflation rising at its fastest pace since 2022, while consumer inflation recorded its largest increase since 2023. Price pressures intensified again as the energy shock linked to the Iran conflict reinforced the narrative that inflation could be more difficult to reduce in the near term.
On the activity front, retail sales growth slowed as expected, but still indicated relatively resilient consumer demand. The combination of resilient consumption and firming inflation has further strengthened market confidence that monetary conditions will remain tight.
Markets have now completely discounted the possibility of a Fed rate cut this year, and some participants have begun to increase the odds of a December rate hike. This repricing has strengthened support for the dollar through policy expectations.
Investors' attention is also focused on the second day of the Trump-Xi summit. Geopolitical risks remain an additional factor after Xi warned that the Taiwan issue could become a source of "collision," potentially adding to volatility in global sentiment amid market focus on inflation and the direction of US interest rates. (asd)
Source: Newsmaker.id
