TLDR
- The US Dollar Index held above 101.00 as investors awaited June CPI data
- Rising oil prices, driven by Middle East tensions, are pressuring risk-sensitive currencies like the Indian rupee
- Markets are pricing in roughly a 50% chance of a Fed rate hike in July
- The New Zealand dollar outperformed G10 peers after hawkish central bank signals
- EUR/USD faces downside risk if energy prices keep climbing, with 1.10 a possible target
The US dollar steadied on Tuesday as traders braced for fresh inflation data and oil prices continued to climb on the back of escalating Middle East tensions. The Dollar Index traded just above the 101.00 level during European hours.
June CPI data is forecast to show annual inflation easing to 3.8%, down from 4.2% in May. Headline inflation is expected to dip month-on-month due to lower energy costs, but core inflation around 0.2% monthly is not enough to ease concerns about persistent price pressures.
Fed Rate Hike Bets on the Rise
Markets are now pricing in roughly a 50% chance of a Federal Reserve rate hike at the July meeting, with around 43 basis points of tightening expected by year-end. Fed Governor Chris Waller said Monday that a hike may be needed in the short term if core inflation stays elevated.
Chair Kevin Warsh began his first House testimony on Tuesday. Fed speakers Barr, Goolsbee, Cook and Bowman were also scheduled to speak throughout the day.
If the Strait of Hormuz blockade continues, analysts at ING say the Dollar Index could quickly reach 102.0.
Oil and Geopolitics Drive Currency Moves
Brent crude rose to $84 per barrel on Tuesday, supported by US military strikes carried out for a third consecutive day on Monday. Iranian media reported explosions near Kish, Qeshm, Abu Musa and the port city of Bandar Abbas.
US crude inventories, including commercial and strategic reserves, stood at 730.8 million barrels as of July 3, the lowest level since 1984.
The Indian rupee hit a fresh seven-week low against the dollar, with the currency pair climbing near 96.13. Domestic crude futures opened more than 4% higher during the session.
The euro slipped below 1.1400 against the dollar. EUR/USD faces a potential move toward 1.10 if Brent reaches $90 to $100 per barrel and European gas prices climb to €55 to €60 per megawatt hour.
European Central Bank President Christine Lagarde was scheduled to meet US Treasury Secretary Scott Bessent on Tuesday and deliver a speech on the economic outlook.
The New Zealand dollar was the top performer in the G10 this week. The currency gained around 0.8% on Tuesday after Reserve Bank of New Zealand Chief Economist Paul Conway said further monetary easing may be needed if Middle East-driven inflation proves persistent. Markets are pricing in 60 basis points of tightening in New Zealand by year-end.
The Japanese yen traded sideways above the 162.00 level. Japan’s Finance Minister Satsuki Katayama said a sharp shift in the asset management environment could prompt a review of the Government Pension Investment Fund’s portfolio.
The British pound steadied near 1.3350 ahead of UK GDP data for May, due later in the week.
Stop guessing and start investing with confidence. KnockoutStocks gives you the AI insights, market intelligence, and stock research you need to spot opportunities, cut through the noise, and make smarter investment decisions — all in one powerful platform.
Sign up today and get 50% OFF full access to our premium stock picks.
Simply use coupon code SPECIAL50 at checkout to claim your exclusive discount.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
