The US Dollar Index (DXY) closed the previous three days in negative territory and lost more than 1% during that period. Still, Tuesday's remarks by Jay Powell were a reminder of the very hawkish Fed policy. Ultimately, rate and growth differentials should curb the dollar's weakness against most peers, economists at ING report.
“Clearly, the monetary policy story is playing a secondary role in the market narrative at the moment, but yesterday’s comments by Fed Chair Powell were quite relevant from a signalling perspective, as he firmly reiterated the Fed’s determination to bring inflation sustainably lower, even by hiking beyond the neutral rate if necessary.”
“While the dollar momentum is set to remain weak as long as global assets stay in recovery mode, the notion of aggressive Fed tightening continues to argue against a sustained bearish dollar trend.”
“Incidentally, this week’s moves have likely placed the dollar in a less overbought condition. With this in mind, DXY should find increasing support below the 103.00 area.”
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