US Dollar Index to push onto the 100 area over the next week – ING

On Thursday, the US Dollar Index (DXY) gained more than 0.5% as markets turned cautious. A hawkish Federal reserve, less exposure to supply shocks and defensive characteristics will keep the dollar bid, in the opinion of economists at ING.

No signs of the Fed backing away from tightening

“Investors will probably prefer currencies where: i) central banks look prepared to deliver on tightening, ii) are less exposed to global growth, iii) are backed by commodity exports to deliver terms of trade gains, and iv) have fewer links to eastern Europe. The dollar ticks most of these boxes, especially if the Fed pushes ahead with tightening at a time when global growth forecasts are being revised lower.”

“The US focus today will be on the US March Michigan consumer sentiment release. Presumably higher gasoline prices will be taking their toll here. Yet there are no signs of the Fed backing away from tightening – and money markets are actually starting to price a slightly higher terminal rate, earlier. This all looks dollar-positive to us.”

“DXY has been consolidating near the highs of the year and can push onto the 100 area over the next week.”