US Dollar Set To Soar On Quicker Rates Lift-Off

Inflation speeding up in the United States boosted the case for sooner Federal Reserve interest rate hikes on Monday as the greenback traded near a 2 1/2-week high against major peers.

After the Japanese yen weakened against the U.S dollar as a strong showing for the ruling party reduced political uncertainty, it approached a 1 1/2-week high against the yen.

As measured against six rivals, the dollar index was little changed at 94.166, hovering close to Friday’s peak of 94.302, the highest level since Oct. 13.

Following a bounce off the 50-day moving average and a support line ascending from June, the greenback gauge jumped the most in four and a half months the previous day.

As a result, the US Dollar Index appears poised to challenge the yearly top near 94.55 if it keeps rising.

As a result, September’s high near 93.7 and the 94 thresholds can test the short-term bears before sending them to the 93.40-35 support confluence including the 50-day moving average and the multi-day support line.

Prime Minister Fumio Kishida’s Liberal Democratic Party did well in Sunday’s election, holding its strong majority and securing Kishida’s place in a fractured party. He can now ramp up stimulus, as expected.

The yen has weakened slightly this morning as a result of reduced political uncertainty. The Fed remains the biggest driver of dollar-yen direction going forward.”

With the Federal Open Market Committee expected to announce a tapering of stimulus on Tuesday, monetary policy in the United States and elsewhere is in sharp focus this week.

A 4.4% surge in the government’s index of core personal consumption expenditures – the Fed’s preferred inflation measure – solidified market expectations for a rates lift-off around the middle of next year.

Following the data, futures on the fed funds rate, which track short-term rate expectations, priced in a 90% chance of quarter-point tightening by June 2022, factoring in another rate increase by December.