CANBERA (dpa-AFX) - The U.S. dollar strengthened against other major currencies in the European session on Monday, as trader are pricing out the likelihood of a rate hike at the Fed meeting in late October, although expectations for a 25-basis-point increase in December are still firmly on the table.
Traders currently give an 85% probability that the US central bank will hike borrowing prices once more by year's end, according to CME Group's FedWatch Tool.
The September FOMC meeting minutes, which were made public last Wednesday, upped the stakes by confirming that policymakers continue to see inflation as the primary danger to macroeconomic stability and supporting the need for additional policy tightening.
Over the weekend, the Iran-backed Houthi militia in Yemen intensified its campaign against Saudi Arabia in the Middle East, using a combination of ballistic and cruise missiles along with drones to strike King Khalid International Airport in Riyadh.
Saudi Arabia vowed to retaliate for the deadly attacks, and US President Donald Trump hinted that he would join operations against the organization and resume attacks on Iran. In addition, Washington's reaction to Iran's suggestion to reopen the vital Strait of Hormuz was deemed inadequate by Iran's senior security official. This maintains the geopolitical risk premium.
Traders await the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) due to be released on Wednesday and Thursday, respectively. In addition, Fed Chair Kevin Warsh's remarks at the World Bank and IMF annual meetings in Bangkok on Friday will influence the USD.
In the European trading today, the U.S. dollar rose to a 4-day high of 1.1173 against the euro and more than a 2-week high of 158.65 against the yen, from early lows of 1.1218 and 158.08, respectively. If the greenback extends its uptrend, it is likely to find resistance around 1.10 against the euro and 160.00 against the yen.
Against the pound, the greenback edged up to 1.3228 from an early 5-day low of 1.3262. The greenback may test resistance around the 1.31 region.
The greenback advanced to a 4-day high of 0.8334 against the Swiss franc, from an early 1-week low of 0.8293. On the upside, 0.84 is seen as the next resistance level for the greenback.
Against the Australia and the New Zealand dollars, the greenback climbed to nearly a 2-week high of 0.6996 and a 4-day high of 0.5593 from early lows of 0.6966 and 0.5619, respectively. If the greenback extends its uptrend, it is likely to find resistance around 0.68 against the aussie and 0.54 against the kiwi.
The greenback edged up to 1.4268 against the Canadian dollar, from an early low of 1.4240. The next possible upside target for the greenback is seen around the 1.43 region.
Looking ahead, Canada stock markets are closed in observance of Thanksgiving Day holiday.
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