US Dollar Index rallies on Fed rate outlook

The US Dollar Index (DXY) staged a notable rally in the latter half of the week, a move that most market participants had not anticipated six months ago. The resurgence is attributed to growing expectations that the Federal Reserve may deliver another rate hike, reversing the dovish narrative that had prevailed.

Traders are now pricing in a higher probability of tightening, which has boosted demand for the greenback. The DXY's climb marks a significant shift in sentiment, as many had written off any sustained dollar strength earlier this year.

The move comes amid a reassessment of global monetary policy divergence, with the Fed potentially maintaining a hawkish stance while other central banks ease.