Dollar near sharpest monthly gain in a year as rate bets build

The dollar swept past chart resistance Thursday and is on track for its best monthly performance in almost a year. Traders are betting the U.S. economy's strength will keep short-term interest rates elevated, and they are waiting on the next inflation print to test that view.

The dollar index pushed above a key technical level, extending a rally that has gathered pace through April. The move reflects a growing conviction that the Federal Reserve will hold rates higher for longer. Markets have trimmed bets on a rate cut before September, with some traders now pricing in a small probability of a hike later this year.

EUR/USD slipped below $1.07, pressured by the widening rate differential. The pair is down more than 3% this month. Sterling fared little better. GBP/USD hovered near a multi-month low as traders priced in a later start to Bank of England easing. The yen remained under pressure near 155 per dollar, with the Bank of Japan's gradual tightening path offering little support.