Dollar posts one of its best runs of 2026 as 'hot' inflation and hawkish Fed comments fuel rally

A stellar week for the dollar has seen it post one of its best runs of 2026, and it’s hard to see what derails it for now. The hot October inflation report and the surprisingly hawkish remarks from Fed member Waller, once seen as a dove on the committee, have added fresh momentum to the rally.

The data has given the Fed little reason to ease off. Payrolls were stronger than expected, and officials appear more concerned about inflation, which they increasingly see as a demand problem rather than simply a product of a supply shock. This makes it harder for the committee to look through energy-driven price pressures, and raises the stakes for a hawkish pivot at the next meeting.

We see a December hike as all but certain. Waller has said a 50bp move should be considered if core inflation came in at 0.3% or higher, which of course it did, so there is a growing risk of dissents favouring a larger move and a clear signal toward another hike in January.

For the dollar, this means the path of least resistance remains higher for now, as long as the Fed stays hawkish, equity markets continue to wobble and the Iran war drags on without resolution.