Key Points
- USDX traded at 98.423, up 0.045, or 0.05%, after reaching a session high of 98.438.
- The USDX dollar index was last near 98.48, up more than 0.6% for the week and on track for its strongest weekly performance since the start of the Iran war.
- Markets now price a 31.8% chance of a Fed rate hike in December, up from just over 16% one week ago.
- The offshore yuan strengthened for an eighth straight day to 6.7845, while the euro held near $1.1717.
The US dollar held firm on Thursday as traders moved further away from the idea of near-term Federal Reserve easing. Higher US Treasury yields, hot inflation data, and renewed pricing for rate hikes gave the dollar a stronger base, even as global markets watched the two-day summit between US President Donald Trump and China’s Xi Jinping.
USDX traded at 98.423, up 0.045, or 0.05%, at 05/14 11:11:14 GMT+3. The session high stood at 98.438, with a low of 98.298, an open at 98.355, and a close at 98.378.
In the broader market, the USDX dollar index was last around 98.48, up more than 0.6% for the week so far. That puts the dollar on course for its strongest weekly performance since the start of the Iran war. The euro was little changed at $1.1717, but remained set for a 0.6% weekly loss, which would mark its largest decline in two months.
Hot Inflation Changes The Fed Trade
The dollar rally has built on firmer US inflation data. Wednesday’s producer price report showed US producer prices rising at their fastest pace in four years, following Tuesday’s consumer inflation data, which ran at its fastest pace in three years. US wholesale prices rose 6% year-on-year in April, while core producer prices rose 5.2% from April 2025. Energy remained the main pressure point, with gasoline up 15.6% from March and diesel up 12.6%.
That inflation impulse has changed the rates story. Traders now price a 31.8% chance that the Fed raises rates in December, compared with just over 16% a week earlier, according to the CME FedWatch tool.
Analysts expect the FOMC to start a tightening cycle from December and forecast three hikes in the cycle for now. The US Senate approved Warsh as Fed Chair on Wednesday, putting the 56-year-old lawyer and financier at the helm of the central bank. Warsh returns with a broad reform agenda, though changes may take time to show in policy.
Trump-Xi Summit Becomes The Global FX Test
The Trump-Xi summit now sits at the centre of global market risk. Xi told Trump that trade talks were making progress, but warned that disagreement over Taiwan could send relations down a dangerous path. Trump described the meeting as possibly the “biggest summit ever”.
Currency markets reacted carefully. China’s onshore yuan traded around three-year highs, while the offshore yuan strengthened for an eighth straight day to 6.7845 against the dollar. That strength shows traders are pricing a lower risk of immediate US-China trade stress, even as Taiwan remains a major fault line.
A calmer summit tone could help global risk appetite and reduce safe-haven demand for the dollar. A tougher message on Taiwan, trade, technology, or sanctions could push traders back into defensive dollar positions. For now, the dollar is holding firm because Fed pricing is doing more of the work than geopolitics.
Technical Analysis
The US Dollar Index is continuing to trade in a broad consolidation range around 98.42, with price action lacking strong directional conviction after the sharp decline from the March peak near 100.48. The chart suggests the dollar is attempting to stabilise, although momentum remains relatively weak compared with earlier in the year.
Technically, the market is neutral in the short term:
- MA5: 98.10
- MA10: 98.11
- MA20: 98.20
The moving averages are tightly compressed and almost flat, reflecting a market stuck in equilibrium rather than trending aggressively in either direction. Price itself is oscillating directly around those averages, reinforcing the range-bound structure.
Key levels to watch:
- Immediate support: 98.00 → 97.70
- Major support: 97.00 → 96.40
- Resistance: 98.80 → 99.40 → 100.48
The index has spent much of late April and May trading sideways between roughly 97.70 and 98.80, with neither bulls nor bears managing to establish sustained control.
A breakout above 98.80–99.40 would likely improve the short-term technical outlook and could reopen a move toward the broader March high near 100.48. However, the dollar has repeatedly struggled to build upside momentum as traders increasingly position around expectations for eventual Federal Reserve easing later in the year.
On the downside, a break below 97.70 would likely reinforce bearish momentum and expose the broader support region near 97.00–96.40.
The broader macro backdrop remains mixed for the dollar. Treasury yields have stabilised somewhat after recent volatility, but softer inflation expectations and cautious Federal Reserve rhetoric have limited aggressive USD buying. At the same time, global risk sentiment has improved compared with the turbulence seen earlier in the year, reducing some demand for defensive dollar positioning.
Currency markets are also closely watching incoming US inflation data, labour market conditions, and Fed commentary for clues on rate timing. Any shift in rate expectations could quickly break the current consolidation structure.
For now, the USDX maintains a neutral-to-slightly bearish bias, with the broader trend remaining soft while price stays capped beneath the 99.00–99.40 resistance region.
Cautious Forecast
USDX keeps a mildly bullish bias while it holds above 98.204 and 98.112. A break above 98.438 would support a move toward 99.406, especially if Treasury yields stay firm and Fed hike pricing keeps rising.
A drop below 98.098 would weaken the recovery and suggest traders are fading the latest inflation-driven dollar move. The strongest upside path needs three forces to align: hot inflation keeps Fed tightening risk alive, the Trump-Xi summit avoids a yuan-driven dollar reversal, and long-dated Treasury yields remain close to their highest levels since mid-2025.
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Trader Questions
Why Is The US Dollar Rising?
The US dollar is rising because traders are pricing in stronger inflation pressure and a higher chance of Federal Reserve rate hikes.
The USDX dollar index traded near 98.48, up more than 0.6% for the week, putting it on track for its strongest weekly performance since the start of the Iran war.
What Is The Current USDX Price?
USDX traded at 98.423, up 0.045, or 0.05%.
The session high was 98.438, with a low of 98.298, an open at 98.355, and a close at 98.378.
Why Are Fed Rate Hike Bets Supporting The Dollar?
Fed rate hike bets support the dollar because higher US rates can make dollar assets more attractive.
Markets now price a 31.8% chance that the Fed raises rates in December, up from just over 16% one week ago.
How Is US Inflation Affecting USDX?
Hot US inflation is supporting USDX by reducing expectations for Fed easing and raising the chance of tighter policy.
Producer prices posted their biggest increase in four years in April, while consumer inflation ran at its fastest pace in three years.
Who Is Kevin Warsh And Why Does He Matter For The Dollar?
Kevin Warsh is the incoming Federal Reserve Chair after the US Senate approved his appointment.
Markets are watching his policy stance closely because he will inherit a central bank facing rising inflation pressure, higher energy costs, and renewed debate over whether the Fed may need to hike again.
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