FX.co ★ USD Appreciates on Thursday

The dollar index climbed to 99 on Thursday, as another surge in oil prices amid escalating tensions between the US and Iran led investors to ramp up expectations for a Federal Reserve rate hike next week. Markets are now pricing in a 70% probability of a 25bps increase, up from 60% the previous day, with a rate hike fully priced in for October. The latest PPI data had limited impact on those expectations: while headline producer inflation accelerated to 0.4%, core PPI rose just 0.2% month-on-month, down from 0.3% previously and below the 0.3% consensus forecast. Friday’s CPI release will be crucial for gauging the trajectory of inflation pressures. Elsewhere, the ECB raised interest rates by 25bps as anticipated and revised its inflation forecasts higher.