Fed pricing underpins renewed US Dollar Index strength – Deutsche Bank

EUR/USD was quoted at 1.108 in spot trading. Deutsche Bank’s Jim Reid and colleagues note that Fed funds futures repriced towards a more hawkish outlook following the CPI release, raising expectations for future rate increases. This helped lift the Dollar Index to its highest since April 2025. The Euro dropped to an 18-month low against the Dollar, with EUR/USD closing near 1.109.

+0.66%: Dollar Advances on Hawkish Fed Repricing

"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."

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