FX.co ★ Dollar Edges Higher Ahead of Fed Meeting

The dollar index climbed toward 99.2 on Monday, marking its fourth straight session of gains, as investors positioned themselves ahead of the upcoming Federal Reserve policy meeting and weighed the inflationary implications of surging oil prices. Markets are currently assigning an 86% probability to a 25-basis-point rate increase on Wednesday, with at least one additional hike anticipated later this year.

Data released on Friday showed that US headline consumer inflation held at 3.4% year-on-year in August, unchanged from July and in line with market expectations. However, underlying price pressures proved firmer than forecast, with core CPI rising 0.3% on a monthly basis. Producer price inflation also quickened in August, while labor-market indicators continued to signal robust employment conditions.

The recent spike in oil prices has added to inflation concerns, following Saudi Arabia’s shutdown of the key East–West pipeline, a major route that offers an alternative to shipping crude through the Strait of Hormuz.