Dollar Rises, Interest Rate Hike Expectations Strengthen
The US dollar index strengthened to 99.4 on Wednesday, hitting a nearly two-month high. The rally came after ADP data showed the private sector added 122,000 jobs in May, beating expectations and marking the highest level since January 2025.
This data reinforces the perception that the US labor market is still showing momentum. The transmission channel is clear: resilient hiring maintains confidence that demand pressures have not weakened sharply, thus raising expectations that monetary policy could remain tight for longer.
Additional support came from JOLTS data earlier this week, which showed April job openings rose to their highest level since November 2024, adding evidence that labor demand remains solid. The combination of ADP and JOLTS contributed to a repricing of interest rate expectations, with the market pricing in a growing chance of a Fed rate hike by the end of the year.
Beyond domestic data, the dollar was also supported by escalating tensions in the Middle East, which lifted oil prices for the third consecutive session. The energy rally heightened inflation concerns, strengthening the market's case for maintaining a higher interest rate scenario.
Currently, the market is pricing in an 85% probability of a quarter-point interest rate hike by the end of the year, up from 60% a week ago. The next focus will be on the consistency of the next labor market indicators and oil movements, as both will determine how far interest rate expectations and the dollar's strength can continue. (gn)
Source: Newsmaker.id
