The US dollar remained firm near multi-month highs on Tuesday amid elevated Treasury yields and ongoing expectations of interest rate hikes.
The currency could remain supported by the Federal Reserve’s hawkish tilt during its latest meeting.
The central bank’s latest projections reinforced expectations that inflation risks remain elevated, prompting markets to price in at least one 25-basis-point rate increase by the end of the year.
As a result, attention could turn to new economic data to confirm the more hawkish expectations. In the near term, traders will monitor today’s PMI data and weekly ADP employment figures, in addition to Thursday’s inflation release. Strong inflation data could push the dollar and yields higher.
However, gains in the dollar could be capped by improving sentiment surrounding the Middle East. Progress in negotiations between the United States and Iran has reduced demand for safe-haven assets, while the decline in oil prices could ease concerns over energy-driven inflation. Further progress in talks could continue to weigh on the currency and yields, while any setback may support renewed safe-haven demand.
Leave a Comment