US Dollar Index pushes higher and revisits 98.70, looks to Ukraine, inflation

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, extends the bullish performance to the 98.70 region at the end of the week.

US Dollar Index looks bid-post US CPI

The index advances for the second session in a row on Friday and shifts the focus to the immediate target at the 99.00 mark on the back of rising yields and the absence of progress in the geopolitical landscape.

In fact, the so far mixed performance in the US money markets show some lack of upside traction in yields in the belly and the long end of the curve, while the short end has now surpassed the 1.70% mark for the first time since September 2019.

It is worth mentioning that US yields have extended the monthly rebound this week particularly in response to bouts of optimism in the risk complex and after US consumer prices rose at the fastest pace in the last forty years in February (+7.9%).

Back to geopolitics and the situation in Ukraine, another round of talks between officials from both countries once again yielded no substantial progress on Thursday other than promises of a future meeting.

In the US data sphere, the only release of note will be the flash Consumer Sentiment tracked by the U-Mich index for the month of March.

What to look for around USD

The index extends the upside and approaches the 99.00 hurdle at the end of the week, as the dollar picked up renewed pace on the re-emergence of the geopolitical-led risk aversion and the firm recovery in US yields. The persevering bias towards the safe haven universe is predicted to keep supporting the dollar and the rest of its peers in the current uncertain context surrounding the Russia-Ukraine military conflict. Also supportive of the stronger buck appears the current elevated inflation narrative, the start of the Fed’s normalization of its monetary conditions later this month and the solid performance of the US economy.

Key events in the US this week: Flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict under the Biden administration.

US Dollar Index relevant levels

Now, the index is up 0.22% at 98.73 and a break above 99.41 (2022 high Mar.7) would open the door to 99.97 (high May 25 2020) and finally 100.00 (psychological mark). On the flip side, the next down barrier emerges at 97.85 (weekly low Mar.9) followed by 97.73 (monthly high Feb.24) and then 96.35 (55-day SMA).