Forex Analysis by Fawad Razaqzada covering: US Dollar Index Futures, US Dollar Index. Read Fawad Razaqzada's latest article on Investing.com
will be in sharp focus, and how it closes the session could potentially shape its direction for the rest of the week. While Tuesday’spointed to strong wage growth, it is worth pointing out that the data was quite backward-looking as it is a quarterly print. Recent survey-based data have been far from great, in contrast to hard data.from the Conference Board also dropped more than expected to 97.0 from a downwardly revised 103.1 the month before.
Inflation has surpassed expectations in recent months and throughout the first quarter, and yesterday’s employment cost index was just the icing on the cake as it confirmed inflationary pressures so far this year. There is therefore little reason for the Fed to consider cutting rates sooner, other than the pressure it may be under from the US Treasury Department. With yields remaining high, this is making it increasingly costly for the government to borrow and make interest payments.
But with the market pricing out the prospects of a rate cut before the end of the summer, any hawkish messages from the Fed are unlikely to provide significant further support to the dollar than a dovish surprise might. So, I don’t expect to see a big rally in the US dollar unless the Fed is super hawkish and floats the idea of another rate rise.
Following the FOMC rate decision tonight, if the DXY still holds the breakout and is above or around the previous week's high of 106.51 then this could pave the way for further technical buying towards the October 2023 high of 107.35.
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