Forex Today: US Dollar strengthens on hotter US inflation, rising Fed hike expectations
Here is what you need to know on Tuesday, September 15:
On Tuesday, September 15, the US Dollar (USD) experienced a surge, reaching near two-week highs around 99.60 in early European trading due to surging oil prices and rising Treasury yields since 2007. August's US Consumer Price Index (CPI) showed a significant acceleration, backed by strong readings in several Producer Price Index (PPI) components, fueling expectations of more frequent Federal Reserve (Fed) rate hikes.
The CME FedWatch tool indicated a more than 92% probability of a 25 basis points (bps) rate increase during the Fed's September meeting.
The USD also strengthened against the New Zealand Dollar, the strongest pairing among major currencies on the given day. The heat map displayed percentage changes of various currencies against each other, highlighting USD's dominance.
West Texas Intermediate (WTI), the US crude oil benchmark, rose over 1% on Tuesday as global supply concerns intensified following attacks on Saudi Arabia’s East-West pipeline and postponed talks between Gulf Arab states and Iran. Iranian President Masoud Pezeshkian reiterated Iran's demand for negotiations with the US, while US President Donald Trump announced openness to engaging with Iran, contrasting with previous statements.
Asian markets exhibited mixed results, with China's Retail Sales growing by 0.4% year-over-year in August, below the anticipated 0.8%. Industrial Production rose 5.2% year-over-year in August, surpassing the market's 4.8% expectation.
Commerzbank highlighted uncertainty surrounding the Fed's monetary policy, emphasizing a significant divergence between market pricing and economist expectations. While market participants anticipate rate hikes, economists surveyed expect cuts, indicating a lack of consensus on the policy path. The new Fed Chair, Kevin Warsh, has rejected explicit forward guidance, potentially making data releases more influential.
This change could reduce frequent USD fluctuations between statements and press conferences compared to the previous Fed Chair, Jay Powell.
The FXS Speechtracker score of 6.4 compared to President Lagarde's 6.2 average suggests a slightly hawkish stance, driven by Euro-area inflation at 3.3% and the assertion that the shock is long-lasting. The Euro (EUR) faced selling pressure below 1.1550 in the European morning due to volatile energy markets caused by the Middle East conflict, urging the ECB to act for the entire Euro area.
Calls for simplifying administrative regulations and focusing on above-target inflation kept the risk balance skewed towards a hawkish interpretation for the Euro.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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