USD Surges On Hawkish Fed Officials’ Comments

The US dollar index has finally turned imbalance after consolidating in a range of 97.68-99.42 over one month. The strength of the dollar as a robust asset amid an aggressive hawkish stance from Fed policymakers has supported the Index to establish above 99.00 and has also exposed it to touch the psychological figure of 100.00.

The hawkish comments by Fed Governor Lael Brainard helped inject an adrenaline dose into the Dollar Index. The FOMC member pointed out that the Fed is going to transfer the burden of hot inflation and investors expect an aggressive interest rate hike in May’s policy meeting. Brainard stated that the Fed is inclined to announce a stronger action if the parameters of inflation and its expectations indicate that such action is highly required. Fed will start reducing its balance sheet size at a rapid pace in order to contain the impact of inflation.

US ISM Services PMI
US Institute for Supply Management (ISM) has unfolded the Services Purchase Managers Index (PMI) on Tuesday and has displayed an outperformance from the US economy against the estimates. The US ISM Services PMI landed at 58.3, higher than the preliminary estimate of 58.3 and prior print of 56.5, which has further benefited the robust Dollar Index.

The hawkish stance on May’s monetary policy by FOMC member Lael Brainard has raised the odds of a 50 basis point (bps) interest rate hike significantly. This has fueled the 10-year US Treasury yields, which have recaptured 2.55%.

Going forward, the Fed will release the FOMC minutes on Wednesday, which will unfold the mindset of Fed Chair Jerome Powell and his colleagues behind featuring a 25 (bps) interest rate hike in March.