FX.co ★ Dollar Towers on Hawkish Fed Signals

The dollar index traded around 100.8 on Friday, hovering near its highest level since May 2025, as investors ramped up bets on additional rate hikes this year following hawkish signals from the Federal Reserve. On Wednesday, the Fed left interest rates unchanged as expected, but roughly half of FOMC members now anticipate at least one rate increase in 2026. The central bank also raised its inflation forecasts to reflect the economic impact of the conflict in the Middle East. Chair Kevin Warsh declined to offer explicit guidance on the Fed’s next move but reaffirmed the central bank’s commitment to restoring price stability. Meanwhile, the US–Iran interim peace agreement took effect on Thursday, bringing an end to a prolonged conflict that had caused a historic disruption in global energy supplies. Although the deal eased geopolitical risks and pushed oil prices lower, markets remained focused on the Fed’s policy outlook and the prospect of tighter monetary conditions.