The US Dollar (USD) is outperforming this week, fuelled by higher US Treasury yields as solid macroeconomic data and high inflationary pressures have boosted expectations of Federal Reserve (Fed) rate hikes later in the year.
The US Dollar Index (DXY), which measures the value of the Dollar against a basket of peers, is trading at five-week highs, at 99.20, at the time of writing, on track for its best weekly performance in two months, after rallying about 1.30% in the last five days.
US Retail Sales data released on Thursday revealed that consumption remained resilient in April, and weekly Initial Jobless Claims provided further signals of a stabilising labour market, despite the war in the Middle East.
Consumer and producer inflation data released earlier in the week, on the other hand, have shown that the impact of the energy shock has been stronger than expected. These figures have prompted markets to raise bets of Fed interest rate hikes by the end of the year, which have propelled US Treasury yields to one-year highs and are buoying speculative demand on the Greenback.
In the meantime, the US-Iran war remains stalled, with the Strait of Hormuz still closed and Oil prices around $100 aper barrel, threatening to derail global growth. US President Donald Trump affirmed that he is losing patience with Iran, following talks with Chinese President Xi Jinping in Beijing, where he is looking for some support to resolve the Middle East crisis, apart from further trade facilities to US businesses.
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