The US Dollar Index (DXY), which gauges the dollar’s strength against a set of six other currencies, is hovering around 99.80 during Asian trading on Friday. This uptick seems linked to ongoing uncertainty in the Middle East and recent inflation reports from the US. Later today, preliminary figures for the Michigan Consumer Confidence Index for June are expected to be released.
According to reports, the U.S. military successfully intercepted and destroyed two Iranian drones aimed at commercial vessels near the Strait of Hormuz on Friday.
This event followed President Trump’s announcement on Thursday to suspend new military actions against Iran as negotiations approached a consensus on the deal. The rising tensions might give the dollar a temporary boost against its rivals.
On another note, the U.S. Bureau of Labor Statistics disclosed on Thursday that producer prices in the U.S. saw a sharper increase than anticipated in May, reaching the highest level since November 2022. The Producer Price Index (PPI) rose by 6.5% year-on-year in May, up from 5.7% previously, surpassing expectations of a 6.4% climb. Monthly figures also showed a PPI increase of 1.1%, which exceeded the consensus forecast of 0.7%.
Meanwhile, core PPI grew at an annualized rate of 4.9%, which aligns with the preliminary number from April but falls short of the anticipated 5.4%. Given the current inflation landscape, the Federal Reserve is likely to remain cautious for now.
Presently, markets are assigning a 43% likelihood of a 0.25% rate increase in December, a rise from around 14% a month earlier, according to data from the CME FedWatch tool.
