US Dollar Talking Points
The US Dollar Index (DXY)[1] bounces back from a three-day losing streak ahead of the Federal Reserve interest rate decision on March 17, and fresh forecasts coming out of the central bank are likely to influence theGreenback as Fed officials are slated to update the Summary of Economic Projections (SEP).
Fundamental Forecast for US Dollar: Neutral
The US Dollar[2] Index (DXY) attempts to retrace the decline from the monthly high (92.50) amid the recent rebound in longer-dated US Treasury yields, and it remains to be seen if the Federal Open Market Committee[3] (FOMC) will adjust the forward guidance for monetary policy as Congress passes the $1.9 trillion coronavirus recovery package.
At the same time, the 379K rise in US Non-Farm Payrolls (NFP)[4] may encourage the FOMC to adopt an improve outlook as the central bank lays out an outcome-based approach for monetary policy, and the Fed rate decision may spur a bullish reaction in the US Dollar if the central bank utilizes the SEP to signal a looming change in policy.
Source: FOMC
It remains the FOMC will adjust the monetary policy outlook as the minutes from the January meeting insist that “the Committee's current guidance was well suited to the current environment because it describes how policy would respond based on the path of the economy,” but an upward revision in the Fed’s interest rate dot may generate a bullish reaction in the US Dollar as it reflects a greater willingness to scale back the emergency measures.
However, recent remarks from Chairman Jerome Powell[5] suggest the Fed is in no rush to alter the course for monetary policy as the central bank head warns that “it’s not at all likely
