The Dollar Index, which measures the movement of the dollar against the six major currencies in a basket of currencies. It surged past 104, reaching its highest level in nearly a month after the U.S. released a much higher-than-expected consumer price index (CPI). This may cause the US Federal Reserve (Fed) to accelerate interest rates to curb inflation.
As of 7:09 p.m. GMT, the dollar index was up 0.93% to 104.13, its highest level since May 17, while the euro rose 1.01% to 141.14 yen and fell 0.92% to $1.052. The dollar weakened 0.09% to 134.20 yen.
Investors added to the forecast that The Fed will raise interest rates by 0.75% at its monetary policy meeting in July. After the release of inflation numbers that rose more than expected today.
The CME Group’s FedWatch Tool showed investors weighed 32 percent that the Fed would raise interest rates by 0.75% at its meeting on July 26-27, up from 19% yesterday.
Some investors also expect the Fed to raise interest rates by 0.50% three times at its June, July and September meetings.
The Fed previously kicked off its rate hike cycle by raising interest rates by 0.25% in March, before rising 0.50% in May, while Fed Chairman Jerome Powell sent Signs the Fed will raise interest rates by 0.50% in both June and July.
The Labor Department said its CPI, a measure of consumer spending inflation, rose 8.6 percent in May year on year. That was a new high in more than 40 years, or since 1981, and beat analyst expectations of 8.3 percent.
The CPI was above 8.3 percent in April and above 8.5 percent recorded in March. which is the highest level since December 2524
In addition, the CPI rose 1.0 percent in May month-on-month. That was 0.7% higher than the forecast.
Meanwhile, the core CPI, which excludes food and energy, rose 6.0 percent in May year-on-year. That was 5.9% higher than analysts’ expectations.
On a monthly basis, the core CPI rose 0.6% in May, above expectations of 0.5%.