US Dollar Index declines towards 105.50 as Fed’s bigger rate hike regime reaches endgame

• The US Dollar is expected to test its three-month low at 105.35 amid sheer optimism in global markets.
• Fed’s Powell would shift to a 50 bps rate hike option as inflation is still in a persistent stage.
• Investors should brace for a higher Fed’s terminal rate as achievement of price stability is still far.

The US dollar index (DXY) is oscillating inches far from the round-level support of 106.00 in the Tokyo session. The US dollar witnessed a vertical fall on Wednesday after surrendering the critical support of 107.00. The mighty US Dollar went through intense selling pressure as investors ditched the risk aversion theme. The reasoning behind a sell-off in the US Dollar is soaring expectations for a lower shift in the interest rate hike in the upcoming December monetary policy.

Investors should be aware of the fact that the US markets will be closed on Thursday on account of Thanksgiving Day.

FOMC minutes clear that 75 bps rate hike regime has reached the endgame

The minutes of the Federal Open Market Committee released in the late New York session dictated that the majority of the Federal Reserve (Fed) policymakers have vouched for a slowdown in the rate hike pace to allow room to judge the progress of the efforts and to reduce financial risks. This indicates that there would be no fifth consecutive 75 basis points (bps) rate hike by the Fed.

Most probably, Fed chair Jerome Powell will shift to a 50 bps rate hike as inflation is still in a persistent stage. For the targeted rate, the Fed believes that the catalyst will go higher.

Upbeat US Durable Goods Orders failed to support the US Dollar

The US Durable Goods orders delivered a stellar performance on Wednesday after landing at 1.0%, higher than the expectations and the prior release of 0.4%. This claims that demand for durable goods is robust and the core Consumer Price Index (CPI) could show some reluctance in displaying any further ease. There is no denying the fact that households in the United States are running at lower real income due to higher inflationary pressure. Therefore, the households would be required to rely upon borrowings for funding the purchase of durable goods.