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Fed expectations bolster the US dollar as energy lifts tightening bets

ING says the US Dollar Index could break above June’s 101.80 high even as it does not expect a Fed hike next week.

Reported · Written up by our desk · Major Pairs

ING’s Chris Turner said the US dollar is supported by higher energy prices that have strengthened expectations for additional central bank tightening.

Turner noted markets are pricing further hikes from both the European Central Bank and the Bank of England, while ING does not expect the Federal Reserve to hike next week.

FXStreet also points to investor expectations that the Fed may need to respond, citing a rise of about 30 basis points in two-year real US dollar swap rates since the June FOMC meeting, as investors price in the Fed’s inflation-fighting credibility.

Turner added that US data is relatively light, but with President Donald Trump threatening a fresh military onslaught on Iran, investors may hold long dollar positions into the weekend, keeping the US Dollar Index near June’s 101.80 peak and vulnerable to an upside breakout.

Latest closeDollar index 101.44 ▲0.3%

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