Dollar Rallies on Solid US Economic News and Soaring Crude Prices

The U.S. dollar strengthened as incoming U.S. data surprised to the upside and rising crude prices boosted inflation expectations, supporting a more hawkish Federal Reserve outlook. Weekly jobless claims were below expectations, productivity beat forecasts, and unit labor costs came in cooler than expected. The article says markets were pricing in a 58% chance of a 25 bp Fed hike at the next FOMC meeting, while a Financial Times report added support by suggesting Chair Warsh could raise rates if inflation re-accelerates. The stronger dollar pressured EUR/USD, which fell from a 7-week high, and USD/JPY rose as the yen weakened under higher oil prices and Treasury yields. Gold and silver also retreated from recent highs on dollar strength and tighter-policy fears, though central bank gold buying remained supportive.