The US dollar has soared to the highest levels seen since three months against the Euro after the release of the CPI data in the previous session drove up expectations for Fed to advance its rate hike and monetary tightening plans. At the time of writing, EUR/USD is trading at around 1.179.

The higher than expected readings have kept the greenback supported against its major peers, with the dollar index touching a high of 92.382 before easing lower. At the time of writing, the US dollar index DXY is trading around 92.66.

US consumer prices posted the fastest growth seen in 13 years during the month of June, with the CPI touching 5.4% YoY and coming in higher than economists’ forecast for a reading of 5% instead. In addition, core CPI which excludes volatile food and energy costs also rose by 4.5% YoY, higher than the forecast of 3.8% and the strongest reading seen since late 1991.

Supply chain challenges and a healthy rebound in demand for travel services as the economy reopens and consumers gain confidence in stepping out after being vaccinated have helped drive up consumer prices. In the wake of the strong CPI report, investors will closely watch the upcoming congressional testimony of Fed Chair Jerome Powell for his thoughts on inflation heating up as economic recovery strengthens.

In addition to focusing on Powell’s testimony, traders will also look out for the Bank of Canada’s upcoming policy announcement scheduled for later today. Markets are hopeful that the BOC could announce plans to increase their efforts towards tapering asset purchases.