US Dollar Talking Points
The US Dollar Index (DXY) trades to a fresh yearly high (100.76) as a growing number of Federal Reserve officials show a greater willingness to normalize monetary policy at a faster pace, and developments coming out of the International Monetary Fund’s (IMF) 2022 Spring Meeting may influence the Greenback as Chairman Jerome Powell is scheduled to speak at the event.
Fundamental Forecast for US Dollar: Bullish
The US Dollar Index (DXY) is on the cusp of testing the April 2020 high (100.93) as New York Fed President John Williams, a permanent voting member on the Federal Open Market Committee (FOMC), insists that the central bank needs to “reverse the policy actions that we put into place back in March of 2022” during an interview with Bloomberg News.
As a result, William went onto say that a 50bp rate hike is a “reasonable option” as the FOMC plans to push the Fed Funds rate towards a more neutral level, and it seems as though the central bank will adjust its approach at its next interest rate decision on May 4 as Governor Lael Brainard insists that the central bank could “reduce the balance sheet at a rapid pace as soon as our May meeting.”
Until then, fresh remarks from Fed officials may continue to sway the US Dollar as Chairman Powell is slated to speak on the global economy at the IMF Spring Meeting, and hints of a looming adjustment to the FOMC’s exit strategy may prop up the Greenback with the central bank on track to embark on a series of rate hikes along with quantitative tightening (QT).
With that said, the US Dollar Index (DXY) may continue to retrace the decline from the 2020 high (102.98) as it the cusp of testing the April 2020 high (100.93), and developments coming out of the IMF meeting may fuel a further advance in the Greenback if Chairman Powell prepares US households and businesses for a further shift in monetary policy.
— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong