US Dollar can recover if Powell delivers a broadly hawkish message – ING
14.12.2022, 10:47

US Dollar can recover if Powell delivers a broadly hawkish message – ING

The Fed prepares to announce another rate hike at 19:00 GMT today. Economists at ING still think Chair Powell will try to deliver a credible rate protest and push back against easing financial conditions. This could take some pressure off the Dollar, but downside risks remain quite high.

In need of some Powell "magic"

“Our perception is that the Fed will want to deliver some sort of ‘rate protest’, essentially pushing back against the recent easing in financial conditions. To do that, Powell will need to downplay the recent abatement in price pressure, stick to the view that the inflation battle is still to be won and ultimately try to re-anchor peak rate expectations to the 5.00% handle. That is easier said than done.”

“While we are in the camp of higher interest rates and a stronger Dollar, we have to admit the risk of wanted or unwanted dovish missteps is elevated.”

“We knew December would be a challenging month for Dollar bulls like ourselves, and downside risks remain significant today. Still, our base case is that the USD can recover some of the lost ground as Powell works his magic to deliver a broadly hawkish – and above all credible – message.”

See – Fed Preview: Forecasts from 18 major banks, downshift to 50 bps

 

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