The US dollar index climbed on Friday, supported by rising Treasury yields and growing expectations of tighter US monetary policy amid increasing inflation concerns.
The move followed a series of data releases showing that both consumer and producer prices accelerated in April.
At the same time, labour market conditions remained relatively stable despite a modest increase in jobless claims.
Persistent inflationary pressures have significantly altered market expectations for the Federal Reserve’s monetary policy. Treasury yields surged across the curve, with the 10-year note reaching its highest level since June 2025 as forecasts increasingly price in the possibility of an interest rate hike next year. While the Fed is still expected to keep rates unchanged this year, the shifting sentiment could continue to support the dollar and yields.
Looking ahead, markets could react to comments from Federal Reserve officials, while they contend with a transition at the head of the institution. At the same time, geopolitical developments in the Middle East are likely to remain a key driver for inflation expectations as well as for the dollar and Treasury yields in the near term.
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