Weekly Roundup: US dollar hits multi-month highs amid Fed bets
Tom Brown May 22nd 2023 - < 1 minute read
After a weak start amid a risk-on mood, the safe-haven US dollar managed to rally on Tuesday as sentiment soured.
Hawkish comments from Federal Reserve policymaker Loretta Mester also boosted USD, raising expectations for more rate hikes from the Fed.
As the week went on, more rate setters at the US central bank echoed Mester’s opinion. US Treasury yields – which often indicate Fed rate hike bets – rallied to a four-month high, pulling the ‘greenback’ with them.
At the end of the week, USD trimmed these gains amid profit-taking and an increase in risk appetite. Comments from Fed Chair Jerome Powell also subdued the US dollar, as he indicated that rates may not rise as high as previously anticipated.
Fed policy speculation is likely to continue to drive USD movement this week, with the Federal Open Market Committee’s (FOMC) latest meeting minutes to be published on Wednesday. If the minutes reinforce expectations of a coming policy pause, the US dollar could face selling pressure.
On Friday, the core PCE price index – the Fed’s preferred gauge of inflation – is due out. Signs of persistently high underlying inflation could boost bets on another Fed hike, thereby supporting USD.
Written by
Tom Brown