US Dollar Index’s run at 104.00 failed. In the view of economists at Westpac, sell-the-fact on Federal Reserve’s 50bps hike is not likely to be a trend change as Fed officials hit the wires and NFP and CPI reinforce the need for further 50bp moves.
104 still likely to give way multi-day/week
“The scale of the reversal, from 103.60 to around 102.50, is probably more indicative of very lopsided positioning than any change in the likely path of the Fed funds rate into 2023.”
“The Eurozone is struggling with a more acute stagflationary situation, while China is battling a Covid outbreak with strict lockdowns, knocking EM growth expectations lower. Yield spreads continue to suggest further upside on DXY in coming weeks, though perhaps in H2 signs of slowdown could cool USD .”
“Payrolls is a wildcard as ever but shouldn’t alter the basic picture of a robust labour market, a point Fed officials will emphasize in coming days in the usual flurry of post-meeting media appearances.”
“Look for bargain hunters in the mid-low 102s, with 104 still likely to give way multi-day/week.”