US Dollar Index aims to balance above 101.80, focus shifts to hawkish Fed bets, US PMI eyed

• The DXY is expected to resume its upside move ahead of ISM Manufacturing PMI.
• A sudden Biden-Powell meeting indicates that the inflation ghost is for real.
• Investors should brace for higher volatility as the US PMI is seen lower at 54.5.

The US dollar index (DXY) has remained lackluster in early Tokyo after a sheer downside move from 102.17. A failed attempt of establishment above 102.00 brought significant offers in the counter, which dragged the asset to near 101.70.

Odds of an extreme hawkish stance from the Fed advances

US President Joe Biden had a meeting with Federal Reserve (Fed) Jerome Powell on Tuesday to discuss the deployment of the quantitative measures that could tackle the strike from price pressures. Although the discussions didn’t result in a potential outcome, a sudden meeting between the top-tier officials of the US economy claims that inflation fears are real and are needed to be addressed as early as possible.

Also, Fed Governor Christopher Waller in his speech at Institute for Monetary and Financial Stability has advocated a spree of 50 basis points (bps) interest rate announcements by the Fed until it finds a substantial reduction in the inflation rate.

US ISM Manufacturing PMI

In today’s session, investors’ focus will remain on the release of the ISM Manufacturing Purchase Managers Index (PMI). A preliminary estimate of the ISM Manufacturing PMI is hinting at underperformance. The economic catalyst is expected to land at 54.5 against the prior print of 55.4.

Key events this week: ISM Manufacturing PMI, ADP Employment Change, Initial Jobless Claims, Nonfarm Productivity, Nonfarm Payrolls (NFP), Unemployment Rate, and ISM Services PMI.

Major events this week:  Bank of Canada (BOC) interest rate decision, European Central Bank (ECB) President Christine Lagarde speech.