The dollar index was sharply higher, rising more than 1% to 106.5 on Tuesday, a level not seen since November of 2002, as pessimism returned due to fears of a recession, especially in Europe, as well as stronger expectations for a more aggressive Fed stance. The euro, which makes up 58% of the dollar index, fell sharply following a slew of downbeat PMI readings and as investors fear that the natural gas crunch may tip Germany’s economy, the largest in the bloc, into a recession. Meanwhile, several Federal Reserve officials have been advocating for another aggressive 75bps rate hike in July to curb surging consumer prices, strengthening expectations for an extended monetary tightening path. Investors now await the FOMC minutes release on Wednesday and the payrolls report Friday.
