United States Dollar Index extends rally as Fed’s 50 bps rate hike prospects heat up
The US Dollar (USD) outperforms its major currency peers on Wednesday, as financial markets have started anticipating a bigger Federal Reserve (Fed) interest rate hike at the December policy meeting.
The US Dollar Index (DXY) has continued its upward trend as market participants anticipate a substantial Federal Reserve (Fed) interest rate increase at their upcoming December meeting. On Wednesday, the DXY rose 0.3% to approach 102.52, marking the highest level in almost four weeks. This strong performance is attributed to expectations of a 50 basis point (bps) hike, a possibility sparked by comments from Fed official Steve Waller.
Waller suggested that a stronger Consumer Price Index (CPI) print could warrant a 50bps rate hike, reigniting discussions about potential revisions to earlier rate cuts. Though analysts at MUFG caution against assuming a larger rate hike at this juncture, they acknowledge that a surge in CPI data combined with a recovery in oil prices could further propel the Fed toward a more aggressive stance.
The USD remains the strongest against the Swiss Franc, with the DXY showing resilience above the 20-day Exponential Moving Average (EMA) and breaking a Bullish Flag pattern. Technical indicators suggest a mild bullish sentiment, supported by a 59 Relative Strength Index (RSI) and strong demand reinforced by the 20-day EMA.
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