US Dollar Index to see fresh highs beyond 97.00 in Q1 2022 – Westpac

Economists at Westpac expect the contrast between the hawkish Federal Reserve and other more wary major central banks to provide a solid underpinning for the US dollar. Therefore, US Dollar Index (DXY’s) Fed-fuelled medium-term uptrend is set to extend into Q1 2022.

Uptrend to extend in Q1 2022

“DXY likely to encounter some turbulence into year’s end – the hawkish FOMC was largely priced in, positioning is heavily lopsided into year’s end and Q4 GDP expectations under pressure. But the underlying uptrend remains soundly intact. DXY has yet to fully reflect the lift in yield support. The Fed is streets ahead of the ECB too, the latter at pains to push back against market expectations for lift-off in 2022 and finding ways to glacially wean the economy off QE support.”

“DXY slippage unlikely to extend much past 95.50, the uptrend likely to resume in the new year, new highs on the cards beyond 97 in Q1 2022.”