The US Dollar is on the rise again, as US interest rates are helping to prop it up, while we wait for a new market theme to emerge. Kit Juckes, Chief Global FX Strategist at Société Générale, explains that without a new driver, strong US data has pushed up pricing of terminal Fed Funds and the Dollar has reverted to rising in sync with real rates.
At present, the market is expecting two or three 25 bps hikes by September, and it may take a bigger inflation scare than what was seen in the recent CPI data, or another very strong labour market report at the start of March, to push the rates higher. Without that, we could see the Dollar stuck in a range again before the next move.
The current consensus is that the next move is more likely to be towards Dollar softness, as growth resumes elsewhere. However, this is not certain, and the Dollar could still continue to rise. This is why it is important to monitor the situation closely, as the market waits for a new theme to emerge.
It is also important to consider other factors that could influence the Dollar. The US Dollar Index (DXY) is a measure of the value of the US Dollar relative to a basket of foreign currencies. The US Dollar Index can be used to determine the relative strength of the US Dollar against other currencies.
The US Dollar Index is influenced by a variety of factors, including US economic data, US monetary policy, global economic conditions, and geopolitical events. The US Dollar Index is also influenced by the relative strength of other currencies, such as the Euro, the Japanese Yen, the British Pound, and the Chinese Yuan.
It is also important to consider the effects of US monetary policy on the US Dollar Index. For example, if the US Federal Reserve raises interest rates, this could cause the US Dollar to appreciate relative to other currencies. This could lead to an increase in the US Dollar Index.
Finally, it is important to consider the effects of global economic conditions on the US Dollar Index. For example, if the global economy is doing well, this could lead to an appreciation of the US Dollar relative to other currencies, leading to an increase in the US Dollar Index.
In conclusion, the US Dollar is currently rising with US rates, as we wait for a new market theme to emerge. It is important to consider a variety of factors that could influence the US Dollar Index, including US economic data, US monetary policy, global economic conditions, and geopolitical events. Additionally, it is important to monitor the situation closely, as the market waits for a new theme to emerge.
