US Dollar Index eyes 100.00 ahead of a fresh risk-aversion wave, focus shifts to US CPI

• Bulls eye 100.00 amid the absence of any material outcome in Russia-Ukraine peace talks.
• The odds of a 50 bps Fed rate hike in March’s monetary policy meeting are scaling higher.
• US CPI, Initial Jobless Claims, and Michigan Consumer Sentiment Index are next on tap later this week.

The US dollar index (DXY) is hovering around 99.27, awaiting a fresh impetus from the Russia-Ukraine war. The DXY has capitalized on each negative headline from the Ukraine crisis, Eurozone recession expectations, bloodbath in the Asian markets, etc.

Now that the dollar-backed index is closer to 52-weeks high at 103.00, the asset awaits a new trigger from the Russia-Ukraine war to bring significant bids by the market participants.

Status of expectations from the Federal Reserve (Fed)

Fed’s Chair Jerome Powell is set to announce the interest rate decision next week. Investors are looking forward to the extent of an increase in the benchmark rates by the Fed. A 25 basis point (bps) is already confirmed by Fed chair Jerome Powell in his testimony last week but higher inflation and upbeat US Nonfarm Payrolls (NFP) could push the extent of interest rates by a 50 bps. However, with rising oil prices and eventually higher commodity prices, a situation of stagflation is imminent going forward. Therefore, US central bank will face tremendous pressure while dictating its monetary policy next week.

Key events in the US this week: Goods and Services Trade Balance (Tuesday), JOLTS Job Openings (Wednesday), Consumer Price Index (Thursday), Initial Jobless Claims (Thursday), Michigan Consumer Sentiment Index (Friday).

Eminent issues on the back boiler: Russia-Ukraine peace talks, Ban on Russian oil imports, European Central Bank (ECB)’s interest rate decision.