The Fed convenes later this week and the markets are already pricing in a 25bps rate lift to cool inflation further.
The dollar index
DXY
advanced for a fourth straight day on Friday as currency traders were piling bets on another rate increase from the Federal Reserve on Wednesday. And not without merit. The US central bank has signaled previously it is prepared to hike interest rates at least twice more still this year.
In that context, the US dollar extended its rise against a basket of currencies to over 101.00, up from a 15-month low of 99.55 hit last week. The flurry of economic news and events continues on Thursday – the ECB will hold a press conference and the US will publish its latest jobless claims report as well as preliminary Q2 GDP data.
Is another rate hike guaranteed on Wednesday? No. Despite the markets enthusiastically pumping the greenback, June’s 3.0% annual inflation rate was the lowest in two years. With this in mind, some Fed officials may see another rate bump as too extreme and save it for later when more data would be present.
