Hawkish Fed bets Push US Dollar to Multi-Months Highs

The US dollar has surged to its highest level since early November due to a heated atmosphere for inflation data and rising US rates. This year, the Fed has indicated fewer opportunities for rate reduction, and hawkish wagers have increased, which is another factor supporting the currency. US Treasury yields rose in March as a result of the acceleration of inflation as shown by the US Consumer Price Index, and markets are now pricing in a more aggressive Fed. The US Dollar Index is up +0.72%, trading at 106.013 at the time of writing.

The University of Michigan’s Consumer Sentiment Index dropped to 77.9 from March’s 79.3, which was shyer than expected, indicating a decline in US consumer confidence in the first part of April. Additionally, the core CPI climbed, raising expectations of a hawkish response from the Fed and driving up US Treasury yields.

Only two rate cuts are possible this year, according to Susan Collins of the Boston Fed, while Austan Goolsbee issued a warning that the Fed may intervene if personal consumption expenditures increase. Less than 60% of rate cuts are expected to occur in July, and 75% of rate cuts will occur in December.

The market’s expectations for a rate cut in June also dipped to about 20%. With the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) confirming this bullish outlook, the DXY technical analysis indicates a positive purchasing trend.