US Dollar Index: Fed pricing supports renewed strength – Deutsche Bank

Deutsche Bank’s Jim Reid and colleagues highlight that Fed funds futures shifted in a more hawkish direction after the CPI release, lifting expectations for future rate hikes. This helped push the Dollar Index to its highest level since April 2025, while the Euro fell to an 18‑month low against the Dollar, with EUR/USD closing near 1.109 and spot quoted at 1.108.

Hawkish Fed repricing lifts 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.)