United States Dollar Index reaches fresh 13-month highs near 101.50

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, holds ground for the third consecutive day and is trading near a fresh 13-month high of 101.45 during the Asian hours on Wednesday.

The Greenback gains ground on a combination of robust domestic economic data and a complex, mixed geopolitical landscape. Traders are carefully navigating conflicting signals regarding a potential United States (US)-Iran diplomatic breakthrough. While US President Donald Trump stated that Iran had "fully and completely" agreed to open its facilities to nuclear inspections, Iranian Foreign Minister Abbas Araghchi quickly tempered expectations by clarifying that substantive nuclear negotiations have not actually begun.

Additionally, Iran’s chief negotiator issued a stern warning that the strategic Strait of Hormuz will never return to its pre-war status and will remain firmly under Iranian oversight. Meanwhile, diplomatic efforts showed signs of progress elsewhere as Washington hosted a fresh round of talks between Israel and Lebanon, aimed at securing a ceasefire with Iran-backed Hezbollah.

On US data, strong macroeconomic indicators that reinforced the narrative of "US exceptionalism." June’s flash estimate for the US S&P Global Composite Purchasing Managers’ Index (PMI) climbed to 52.2, comfortably beating May’s reading of 51.5 and signaling healthy business expansion.

The US manufacturing sector showed remarkable resilience, with output jumping to 55.7 from the previous month's 55.1, easily outperforming forecasts of 54.8. Simultaneously, the Services PMI printed at 51.3, ticking up from May's 50.7 and clearing the consensus estimate of 51.0, proving that demand in the broader service economy remains incredibly sticky. The US May Personal Consumption Expenditures (PCE) Price Index (PCE) data will take center stage later on Thursday.

According to the CME FedWatch tool, markets adjusted expectations for a more hawkish stance from the Federal Reserve (Fed). Traders are now pricing in a nearly 86.1% chance of a Fed hike in December, up from 61% before last week’s FOMC meeting.