Fed hike odds hit 86% as DXY holds 99.08 and Brent gains 8% in a week

For FX and rates desks, this is a triple repricing: hotter U.S. PPI and CPI data, an escalating Middle East oil shock, and widening central-bank divergence. The dollar is no longer moving on rate differentials alone—energy-driven inflation is forcing traders to reprice Fed risks, while the BOJ and ECB are moving in different directions.

At the start of Asian trading on Friday, Sept. 11, 2026, the U.S. dollar held near its strongest levels in a week, with the U.S. dollar index trading at 99.081 after a 0.3% gain on Thursday. That resilience was tied less to independent dollar strength than to a rapid repricing of U.S. interest-rate expectations. The Labor Department reported that headline consumer prices rose 0.4% in August, accelerating from 0.1% in July, while core CPI rose 0.4% month-over-month and stood at 2.4% year-on-year. That followed Thursday's data showing producer prices increased 0.4% in August, in line with expectations as energy prices rebounded.

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The euro slipped 0.13% to $1.15950 and was on track for a weekly loss, while sterling traded around $1.3510 and the Swiss franc weakened 0.47% to 0.817 per dollar, leaving the greenback on course for a third straight weekly gain against the franc.

The inflation prints pushed CME Group's FedWatch estimate of a 25-basis-point Federal Reserve hike next week to about 86%, up from roughly 72% a day earlier. IG market analyst Tony Sycamore noted that the safe-haven dollar had already found support from risk-aversion flows tied to higher energy prices, which had lifted the perceived probability of a Fed hike to 70% before the CPI release. The two-year Treasury yield, a barometer of front-end Fed expectations, rose 7.75 basis points to 4.63% and remained near multi-year highs. MonexUSA's Juan Perez added that the core CPI acceleration was helping the dollar against all currencies by increasing the odds of another Fed move.

Energy remained the volatile undercurrent. Brent crude gained roughly 8% for the week after Iran-aligned Houthi forces seized control of Yemen's port city of Mocha and advanced down the Red Sea coast toward strategic islands. In Asian trading Friday, Brent futures rose 1.2% to $108.96 a barrel, extending gains into a sixth day, while WTI surged across the $100 threshold on Thursday for the first time since May 21. Yet the intraday path was choppy: Reuters reported that Brent settled down 2.81% at $104.61, underscoring headline-driven price moves. Diesel prices were at record highs, suggesting that the supply shock is transmitting through refined products and broadening inflationary pressure.

The dollar's advances were therefore measured rather than explosive. The euro slipped 0.13% to $1.15950 and was on track for a weekly loss, while sterling traded around $1.3510 and the Swiss franc weakened 0.47% to 0.817 per dollar, leaving the greenback on course for a third straight weekly gain against the franc. The Australian dollar was flat at $0.7160, and the kiwi edged up 0.1% to $0.5805. The yen, however, held the spotlight for currency strategists. The dollar was up 0.1% at 154.615 yen, and the euro strengthened to about 179.49 yen after the European Central Bank raised rates on Thursday for the second time this year. Yen losses were limited because data released Friday showed Japan's wholesale inflation surged 7.6% year-on-year in August, strengthening the case for a Bank of Japan hike later this month.