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Fundamental Forecast for the US Dollar: Neutral
- Fed rate hike expectations have ratcheted higher in recent weeks. If the FOMC disappoints, the US Dollar may be in trouble.
- What makes the US Dollar so vulnerable to a FOMC disappointment? Positioning in the futures market – which remains near its longest level since October 2019.
- According to the IG Client Sentiment Index, the US Dollar has a mixed bias heading into mid-January.
US Dollar Week in Review
The US Dollar snapped back last week, with the DXY Index closing up by +0.49%, nearly eradicating its losses month-to-date (although remains -0.04% lower in January). With the drums of European war beating louder, EUR/USD rates notched a -0.62% loss, while GBP/USD rates fell by -0.86%. Weakness in risk assets duly stoked demand for safe havens, with USD/CHF rates dropping by -0.22% and USD/JPY rates slipping by -0.43%.
US Economic Calendar in Focus
The upcoming week’s economic calendar…