US Dollar Index to drift towards the 105.00/105.50 area on a hawkish Fed – ING

Dollar regains strength as focus shifts to Powell's testimony. Economists at ING expect the US Dollar Index (DXY) to edge higher towards the 105.00/50 region on a hawkish Federal Reserve.

Powell sticks to his hawkish script

“Richmond Fed President Thomas Barkin said that the Fed should raise rates as fast as possible without breaking anything. Expect this message to be communicated again today when Powell delivers his semi-annual testimony to the Senate.”

“The Fed's terminal rate priced for 2023 is currently near 3.60% (off a recent high at 3.90%) and could go higher again on Powell's testimony. Presumably, that should see some bearish flattening of the US yield curve – which is a dollar positive.”

“DXY could drift towards the 105.00/105.50 area on a hawkish Fed and a difficult international environment that is seeing Asian FX come under pressure again.”