The dollar index (DXY) rose by 0.06% on Tuesday, supported by a 1% increase in WTI crude oil prices, which raised inflation expectations and may lead the Federal Reserve to tighten monetary policy. Chicago Fed President Goolsbee noted that inflation is a significant challenge for the economy, further contributing to dollar strength. Despite this, the dollar’s gains were tempered by news that the US and Iran are close to a deal to reopen the Strait of Hormuz, along with weakened stock performance boosting liquidity demand.
US July existing home sales decreased by 1.7% month-over-month to 4.06 million, aligning closely with the anticipated figure of 4.05 million. Market expectations indicate a 51% probability of a 25 bp rate hike at the upcoming Federal Open Market Committee meeting on September 15-16. Meanwhile, crude oil price fluctuations are contributing to safe-haven demand for the dollar amidst rising geopolitical tensions in the Middle East, including an Iranian missile attack on a tanker and Houthi militant activities in Saudi Arabia.
In currency trading, EUR/USD fell by 0.03% and USD/JPY decreased by 0.01%, with the euro affected by dollar strength and rising oil prices. The markets are pricing in an 89% chance of a 25 bp ECB rate hike on September 10. Gold prices rose to a 2.25-month high, supported by expectations that July’s US core CPI may drop, while silver saw a slight decline. Overall, the precious metals market faces pressure from a stronger dollar and rising oil prices.
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