The dollar could move higher if Fed Chairman Jerome Powell resolutely follows Paul Volcker’s steps in fighting inflation.
The Bloomberg Dollar Spot Index hit a record high on Tuesday, while the Intercontinental Exchange Inc. about a third below its 1985 record high. The Fed’s index is about 11, below its March peak of this year, despite the stark difference in the macroeconomic environment today and 0 years ago. Previously, the diversity of dollar indexes suggests that traders are not entirely convinced that Powell will be as hawkish as his predecessor. The Bloomberg index, which is broader than its peers and includes major emerging market currencies, is likely to be below its peak if it is at this point.
Of course, Powell still has a chance to reaffirm his commitment to fighting inflation because he has yet to announce the Fed’s next policy move and rate outlook later this month.
Powell has taken a number of steps in the direction of Volcker’s famous tack, more openly acknowledging that economic hardship will likely be the short-term price to pay to bring inflation back on target,” he said. Sean Callow, senior FX strategist at Westpac He added that most central bankers prefer to be compared to Volcker and the closer Powell is to him, the longer the pull of US dollar yields will be. longer. Edward Moya, chief market analyst at Oanda, said both the safe-haven outflows from the weakening of the global economy and the resilience of the US economy pave the way for the Fed to continue operating. positive „. He added: “The king of the dollar has woken up from a nap and that could be much more painful for European currencies.
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