The US Dollar Index experienced a rally subsequent to a 25-basis-point increase, establishing a target range of 3.75%-4.00%. Fed Chair Warsh highlighted elevated inflation levels, with markets assigning a 49.8% likelihood to an interest rate hike in October. Maintaining positions above the critical nine- and 50-day EMAs indicates a positive short-term outlook, reinforcing a favourable recovery trajectory. The US Dollar Index, which compares the value of the US dollar to six major currencies, is trading at about 100.30 on Thursday during Asian hours, continuing its winning run for the sixth day in a row. The US Initial Jobless Claims data is set to be released later today. The Greenback remains on a firm footing following an interest rate hike by the US Federal Reserve, alongside signals that another increase could follow before the end of the year. The central bank increased the federal funds rate by 25 basis points, establishing a target range of 3.75% to 4.00%. The action aligned with market anticipations, marking the Federal Reserve’s inaugural interest rate hike in three years.

In his post-meeting remarks, Fed Chair Kevin Warsh explained that the rate hike was driven by inflation remaining “too high” and lingering “for too long,” describing the action as a “sober” and “responsible decision.” Warsh signaled that further rate increases remain on the table in an effort to curb persistent price pressures. Following the announcements, money markets priced in roughly a 49.8% probability of another Fed rate hike at the October meeting, according to the CME FedWatch tool. Warsh’s press conference tone was notably hawkish, as evidenced by the 7.4/10 FXS Speechtracker score, which sits slightly above the 7/10 historical average, indicating a stronger commitment to tightening policy compared to the established baseline. By emphasising that “because of underlying strength of the economy we can afford to focus on price stability” and that “today we took a step toward delivering price stability,” the comments positioned the recent action as a calculated withdrawal of accommodation influenced by ongoing inflation trends rather than mere fluctuations in data.

Emphasis on full employment, non-restrictive financial conditions, and the primacy of price stability reinforces a narrative that the FED is prepared to maintain pressure on inflation, a backdrop typically supportive of the Dollar and detrimental to risk-sensitive FX. The FXS Fed Sentiment Index surged by +26.07 points to 151.79, solidly positioned in hawkish territory and aligning with the above-baseline FXS Speechtracker score. A reading this far above the neutral 100 mark indicates that markets should interpret the decision and tone as a clear hawkish shift, with expectations for tighter policy and a stronger Dollar relative to lower-yielding peers. In the daily chart, the Dollar Index Spot is currently trading at 100.30. The near-term bias is bullish as price holds above both the 50- and nine-day Exponential Moving Averages, suggesting a constructive recovery after the recent dip. The 14-day Relative Strength Index at 63.58 is nearing overbought territory, suggesting that buyers maintain dominance but may encounter fatigue if the index continues to rise too rapidly.

Meanwhile, the elevated FXS Fed Sentiment Index at 151.79 underscores a favourable policy environment for the dollar. On the downside, initial support is observed at the 50-day EMA at 99.69, closely followed by the shorter nine-day EMA at 99.64, creating a narrow demand zone that must be breached to indicate a more significant corrective phase. As long as the Dollar Index Spot remains above these moving averages, the technical structure suggests potential for further appreciation, with the psychological 100.00 level now functioning as an intermediate support rather than a ceiling in the prevailing bullish scenario.