Speculation about the next Fed rate hike is sending the US dollar index higher, and supporting the greenback against its major counterparts. Dollar is higher against many of its counterparts as Forex traders look for a rate hike by the end of 2016.
US economic data has been relatively solid in recent weeks, and that is fueling speculation that the Federal Reserve will raise rates earlier than expected. Earlier in May, Fed officials insisted that many speculators were underestimating the odds of a rate hike by the end of the year. In fact, some of the non-voting Fed members seemed to indicate that a rate hike could come as early as June.
For now, that speculation is helping the US dollar, resulting in gains for the currency, and helping the dollar index surge higher. However, the flip side is that such comments could also set the greenback up for collapse. Excitement over a Fed rate hike could quickly turn to disappointment if the Fed doesn’t perform as expected.
At 14:35 GMT the dollar index is up to 95.386 from the open at 95.317. EUR/USD is down to 1.1198 from the open at 1.1207. GBP/USD is down to 1.4477 from the open at 1.4505. USD/JPY is lower, though, dropping to 109.29 from the open at 110.15.
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