The index is up for the third session in a row on Thursday and advances past the key 200-day SMA (91.51), all following Wednesday’s FOMC event.
In fact, the Fed brough forward any chances of starting the tapering talk at its meeting on Wednesday, while the “dots plot” now projects two interest rate hikes by end of 2023. Regarding inflation, the Fed sticks to the view that consumer prices will return to the target at some point in 2022.
In the wake of the Fed’s meeting, yields of the key US 10-year reference leapt to the vicinity of 1.60% from sub-1.50% levels, while the 5-year breakeven eased to 2.41%.
The index jumped beyond the 91.00 mark in the wake of the unexpected upbeat tone from the FOMC event on Wednesday. The likeliness that the tapering talk could kick in before anyone has anticipated and the views of higher rates by end of 2023 fuel the change of heart in the buck and the upside in DXY to levels last seen in mid-April. However, the still unchanged view on “transient” higher inflation and hence the continuation of the dovish stance by the Federal Reserve carries the potential to temper the current momentum in the dollar. A sustained break above the critical 200-day SMA should shift the dollar’s outlook to a more constructive one.
Key events in the US this week: Initial Claims, Philly Fed Index (Thursday).
Written by FTG, Author from Investing
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