Much of the adjustment to US rate expectations may be complete for now. Therefore, further USD gains will be more difficult, economists at HSBC say.
DXY gains will probably rely more on a dovish ECB than a hawkish Fed
The USD faces a hurdle ahead as a substantial portion of the market has likely already factored in the reassessment of interest rates. The current market pricing aligns with the anticipation of the first Fed cut in June, a consensus shared by our economists. With the Federal Reserve’s upcoming policy meeting scheduled for March 19-20, where a status quo on the policy rate is widely anticipated, further USD gains may hinge more on a dovish stance from the European Central Bank (ECB) rather than any hawkish signals from the Fed. Additionally, the potential for Japan’s intervention threat is expected to limit USD gains against the JPY. Consequently, it appears that the US Dollar Index (DXY) is poised for a period of sideways movement in the coming weeks.
