Persistent fears of interest rate hikes are boosting US dollar strength.

This week risk sentiment is a bit mixed as inflation concerns preoccupy market participants. Major central bank officials like the Fed are adopting a hawkish stance amid a global economic downturn.

At the Bank of Spain (Banco de Espa?a) financial stability conference in Madrid, Jerome Powell said US inflation is well above the Federal Reserve's 2% target and most central bank policymakers expect to have to raise interest rates at least two more times by the end of the year. These hawkish remarks fueled uncertainty among investors who were already anticipating possible interest rate cuts before the end of the year. As a reminder, the Fed maintained its interest rates this month of June.

In the foreign exchange market, the dollar index is up against all major currencies. Greenback boosted by expectations of Fed interest rate hikes. The euro fell against the pound sterling. The Canadian dollar fell after the biggest 13-month drop in the Australian CPI in May. The drop raised bets that the Reserve Bank of Australia (RBA) will keep rates unchanged at next week's meeting. The struggling Japanese Yen has fallen dramatically against the US Dollar such that BoJ leaders are considering an intervention to buy their own currency.

Written by Steve Keutcha - Head of Trading