US Dollar Index: Why Does Fed Pricing Favour Renewed Strength? – Deutsche Bank

The Dollar Index climbed to its highest level since April 2025 as the Euro slid to an 18-month low against the Dollar, with EUR/USD ending near 1.109 and spot quoted at 1.108. Deutsche Bank’s Jim Reid and colleagues attribute the Dollar’s gains in part to a hawkish shift in Fed funds futures following the CPI release, which raised expectations of future rate hikes.

How Is Hawkish Fed Repricing Supporting the Dollar?

"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.)