The dollar is rising, ahead of FED and after the newest sanctions!
At the beginning of the week, I mentioned that this week, some of the most important events that we have to watch, are the FED speakers. And exactly because of these speeches, US Dollar was fueled by hawkish commentary, after upbeat data releases especially employment data. The US Dollar Index has advanced to its two years high, early Wednesday.
On Tuesday, Fed Governor Brainerd in his speech was strongly hawkish. In line with a faster rate hike, he expects the Fed to rapidly shrink its balance sheet as soon as May. In addition, another Fed official, George, also supports accelerating policy tightening and increasing interest rates by 50 basis points at the next meeting. Following them, San Francisco Fed President Mary Daly also reiterated that they could start the balance sheet reduction as early as May.
Later today, the FOMC will release the minutes of its March policy meeting which must be followed by market participants.
The data released by US officials showed that the economic activity continued to expand at an impressive pace in March. Last Friday, nonfarm payrolls were slightly less than expected, but the unemployment rate and labor force participation rate continued to improve. At the same time, in line with inflation data, wages also increased, suggesting that the overheating outcome is continuing to add to the pressure on the Fed to tighten policy.
The yield on the 10-year US Treasury bond soared to 2.6%; the yield on the 2-year Treasury bond hit a record high, since March 2019 at 2.51%. If there are no surprises, the central bank's policymakers will maintain the hawkish monetary policy direction unchanged.
Investors also will keep a close eye on headlines surrounding the Russia-Ukraine conflict and new planning sanctions, as it is increasing the market risk and US dollar demand as a result.
From the technical point of view also, as you can see in the below figure it is in a clear uptrend with strong supports at 97.60, and 96.00 respectively. In this uptrend, the market volume is also increasing, and MACD histogram lines are well above the 0-line, to show that technically also, it remains bullish.
