Strong Dollar Expected to Continue Dominance Against Rivals
Fed Speakers to Echo Caution on Rate Cuts
The strong dollar is likely to maintain its lead over other currencies as Treasury yields surge. Federal Reserve speakers are expected to emphasize the importance of being cautious about cutting rates too early. Macquarie predicts that this week’s Fed speakers will adopt a hawkish tone, diverging from Chairman Jay Powell’s dovish stance in March. The dollar is poised to strengthen further alongside rising US yields leading up to the consumer inflation report on Wednesday.
Rising Inflation Poses Challenges
Experts at Goldman Sachs forecast a 0.29% increase in headline CPI, driven by higher energy and food prices. This could lead to lower year-on-year rates for both core and headline inflation. Fed speakers may highlight the risks of premature rate cuts, while also considering adjustments to the Fed’s estimates of the US neutral rate.
Fed Speakers Warn Against Early Rate Cuts
Last week, prominent Fed officials cautioned against premature rate cuts, with Minneapolis Fed President Neel Kashkari suggesting no cuts this year if inflation remains stable. This week, speakers like President Austan Goolsbee, New York Fed President John C. Williams, and others are expected to echo similar sentiments.
Upcoming Events to Watch
New insights from Fed speakers coincide with the release of consumer inflation data and the Fed minutes from its March meeting on Wednesday. Additionally, the European Central Bank meeting on Thursday could impact the euro. Speculation suggests a potential rate cut despite uncertainties.
“This week could see significant developments at the ECB meeting, although a rate cut might be more likely in June,” said Bank of New York Mellon’s Geoff Yu in an interview with Bloomberg.
