US Dollar Index draws renewed strength from Fed pricing – Deutsche Bank

Following the CPI release, Fed funds futures priced in a more hawkish policy outlook and stronger expectations of future rate rises, according to Deutsche Bank’s Jim Reid and colleagues. The shift helped lift the Dollar Index to its highest level since April 2025. Meanwhile, the Euro slipped to an 18-month low against the Dollar: EUR/USD closed near 1.109, with spot quoted at 1.108.

Dollar gains as markets price in a more hawkish Fed

"Whilst US Treasury markets were closed yesterday, the hawkish implications from the CPI print continued to be felt in futures pricing yesterday. Indeed, Fed funds futures continued to shift in a hawkish direction, with pricing for the December meeting edging up to 28.5bps. And further out the curve, expectations for the September 2027 meeting surged another +7bps to 82bps, although that’s edged back down to 77bps overnight."

"The prospect of a more hawkish Fed helped push the dollar index (+0.66%) to its highest level since April 2025. Conversely, that also saw the euro (-0.66%) reach an 18-month low against the dollar, closing at around $1.109."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)