Fed rate-hike prospects keep United States Dollar Index steady

• Stronger CPI readings could extend gains in the US Dollar Index.
• Nearly a 91% chance of a December rate hike is indicated by the CME FedWatch Tool.
• Growing prospects of a diplomatic settlement to the US-Iran conflict could weaken safe-haven demand, weighing on the Greenback.

102.20 is the approximate level of the US Dollar Index (DXY) during Wednesday’s Asian session. Having advanced over 0.5% the previous day, the index is holding steady. It tracks the US Dollar (USD) against six major currencies.

December rate-hike expectations for the Federal Reserve have been reinforced by the latest US inflation figures, potentially helping the Greenback recover. The CME FedWatch Tool now puts the market-implied probability of an increase next month at approximately 91%.

October’s US Consumer Price Index increased 0.4% month-on-month, above the 0.3% forecast but below September’s 0.6% rise. Excluding food and energy, Core CPI advanced 0.3%, unchanged from September’s pace and ahead of the 0.2% estimate. Annual October figures were not published by the Bureau of Labor Statistics because of last year’s government shutdown.

Prospects for a diplomatic settlement to the US-Iran conflict could nevertheless curb demand for the US Dollar as a safe haven. US President Donald Trump indicated that additional military strikes against Iran might no longer be needed. At a G7 meeting, US Secretary of State Marco Rubio also said major combat operations were no longer necessary. Meanwhile, Congressional Democrats are considering using the approaching government funding deadline to steer the Trump administration towards a peaceful resolution.

102.20: Technical Outlook

Dollar Index Spot stands at 102.20 on the daily chart, with a neutral near-term outlook. Prices remain near recent closing levels, while the dataset provides no clear guidance from nearby moving averages or structural levels. At 56.49, the 14-day Relative Strength Index (RSI) has retreated to the middle of its range. Neither overbought nor oversold, the reading points to balanced momentum following the earlier overbought period.

Upside momentum faces a modest constraint from the RSI reading of 56.49 in the mid-50s, signalling limited directional conviction. The FXS Fed Sentiment Index, meanwhile, remains elevated at 145.61. It represents a broader sentiment headwind rather than an immediate technical catalyst. Available moving averages, Fibonacci levels and horizontal structures offer no clearly defined support or resistance. The Dollar Index is therefore likely to consolidate until a fresh catalyst prompts a breakout from the current 102 area.

8/10 FXS Score: Goolsbee’s ‘real inflation issue’ Warning Sharpens Hawkish Fed Tone

An 8/10 FXS Speechtracker score, substantially above the 6.8/10 historical average, highlighted the notably more hawkish tone of Fed’s Goolsbee and growing concern over persistent price pressures. Describing the latest CPI as “borderline disturbing,” services inflation as “not coming down,” and saying “we have a real inflation issue on our hands” indicates a clear readiness to consider further tightening if disinflation stalls. His remarks on overheating prices, alongside a “steady and stable” job market and the warning that “everything is always on the table”, underline the risk of the Federal Reserve favouring additional restraint more firmly should inflation expectations move higher.

A 1.69-point increase took the FXS Fed Sentiment Index to 145.61, reinforcing the stronger hawkish signal from the elevated FXS Speechtracker score. With the index far above its 100 neutral threshold, markets are likely to see the interview as modestly raising the probability of further policy action to return inflation to target. Such conditions typically favour the Dollar over lower-yielding currencies.

(The technical analysis of this story was written with the help of an AI tool. Know more.)