Dollar heads for best week since March as traders price in Fed rate hike

The dollar rose more than 1% in the week ending May 15, 2026, putting it on track for its strongest weekly gain since early March, after U.S. inflation data prompted traders to price in a Federal Reserve rate increase later in 2026. Two inflation reports unsettled Treasury markets and reinforced concerns that price pressures remain persistent. Money markets now favor a Fed hike this year, reversing expectations from April 2026 that leaned toward easier policy. Analysts also cited higher oil prices tied to renewed Middle East tensions as support for the dollar’s haven demand. Strategists said the greenback could extend gains against the euro, pound and Swiss franc as U.S. yields rise and Europe faces a weaker growth outlook from the energy shock. Options positioning shows traders leaning toward further dollar strength, while speculative FX accounts have shifted more bullish since the Middle East conflict escalated.