US Dollar Hovers Near 19-Month High as Markets Price in Aggressive Fed Rate Hikes
The US dollar hovered near 19-month highs globally and traded above 3.17 shekels locally as hotter inflation fueled expectations of aggressive Fed rate hikes. Major banks project consecutive increases ahead.
The US dollar extended its gains in global markets, hovering near a 19-month high, while the local Israeli market saw minor movements with the dollar trading above 3.17 shekels. Globally, the euro traded around 3.52 dollars, while the dollar index against a basket of major currencies rose by 0.1% to 103.0 points, maintaining its highest level since April 2025. Meanwhile, the euro slipped 0.1% to trade below 1.11 dollars, and the British pound declined by 0.2% to trade above 1.32 dollars.
Traders ramped up bets on further interest rate hikes by the Federal Reserve following higher-than-expected October inflation data and a series of hawkish remarks by top US central bank officials. Policymakers voiced concerns over persistent inflation, leaving the door open for a sharper half-percentage-point rate hike. Several major investment houses now project an additional rate hike early next year, on top of the anticipated increase at the upcoming December 9 meeting. According to Goldman Sachs forecasts, the Fed will raise rates again at the January 29 meeting and likely at the March 19 meeting as well, bringing the expected tally to three consecutive rate hikes.
New York Fed President John Williams is scheduled to speak later in the day, with his remarks drawing intense scrutiny. "His comments will command close attention given his stance ahead of the October FOMC meeting that the Fed could afford to wait on rate hikes," wrote Gavin Friend, senior market strategist at National Australia Bank, in a client note. "Two weeks later, following a hotter-than-expected October CPI print, Fed officials seem to be competing over who can deliver the most hawkish remarks," Friend added. "Markets will hang on every signal from Williams."
Analysts at Bank of America, alongside peers at JPMorgan, questioned the Fed's decision-making process, specifically criticizing the choice to hold rates steady at the previous meeting. According to the analysts, central bankers trapped themselves in hindsight regarding policy options. "At this stage, we maintain our forecast for a quarter-point rate hike in December. However, the Fed appears to be lagging in its response to inflation, and keeping rates unchanged in October was a policy error. We see a growing risk that the Fed will be forced to hike rates again in January rather than March," Bank of America analysts wrote.
