Dollar Gains on Weak Stocks and Hawkish Fed

Economic Indicators - The US February Producer Price Index (PPI) final demand rose by +0.7% month-over-month and +3.4% year-over-year, exceeding expectations of +0.3% month-over-month and +3.0% year-over-year [2] - The PPI excluding food and energy increased by +0.5% month-over-month and +3.9% year-over-year, also stronger than the anticipated +0.3% month-over-month and +3.7% year-over-year, marking the largest year-on-year increase in 13 months [2] Federal Reserve Actions - The Federal Open Market Committee (FOMC) voted 11-1 to maintain the federal funds target range at 3.50% to 3.75%, indicating solid economic activity and elevated inflation [3] - The FOMC raised its 2026 US GDP forecast to 2.4% from 2.3% and increased its core Personal Consumption Expenditures (PCE) projection for 2026 to 2.7% from 2.5% [3] - The FOMC kept its year-end 2026 federal funds rate projection at 3.375%, suggesting a potential interest rate cut of 25 basis points this year [4] Currency Market Dynamics - The dollar index rose by +0.51% as it recovered from early losses, driven by stronger-than-expected PPI data and geopolitical tensions in the Middle East [1] - The euro fell by -0.57% as the dollar strengthened, influenced by the hawkish US PPI report and rising crude oil prices due to escalating tensions in the Iran conflict [6] - The outlook for interest rate differentials remains poor for the dollar, with expectations of a rate cut by the FOMC while other central banks like the Bank of Japan (BOJ) and European Central Bank (ECB) are anticipated to raise rates [5]