US Dollar extends Fed-led advance – ING

Markets are pricing in around 85bp of tightening through successive Federal Reserve rate rises in December and January, with ING’s Chris Turner pointing to a sharp dollar rally driven by macroeconomic developments.

Dollar retains dominance as markets reprice Fed policy

"This week has seen a powerful, macro-driven rally in the dollar. Short-dated US yields are close to 40bp higher since Tuesday morning, when the Federal Reserve's Christopher Waller mused over the need for a 50bp hike in December."

"The Fed centrists might try to emphasise the need for a gradual adjustment in policy, but it is probably only a big US tech sell-off that can put a dent in short-dated US yields now."

"For today, the October US PPI looks likely to keep the narrative of hot US inflation alive. Expect scrutiny into the components of PPI, such as healthcare, airfares and software, that feed into the Fed's preferred PCE inflation data – the next release of which is on 25 November. Were that core PCE to rise 0.3% month-on-month for the third month in a row, expectations of a 50bp December hike would grow."

"DXY has broken to a new high for the year and looks like it can push on to the next resistance level at 104.60. That's about a 1.5% advance from current levels and would be consistent with EUR/USD trading around 1.0880."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)