US Dollar Index slips near 98.40 on expected interest rate hike by the Fed

• The DXY pauses around 98.40 posts in-line interest rate decision by the Fed.
• Seven interest rate hikes are announced for 2022 to contain the inflation mess.
• The monetary policies of BOJ and BOE will be keenly watched this week.

The US dollar index (DXY) has witnessed some long liquidation after the Federal Reserve (Fed) announced an interest rate hike by 25 basis points (bps) to curtail the soaring inflation. The decision was in-line with the estimates, which brought a temporary pause in a firmer rally by the DXY.

Fed's interest rate bulletin

A rate hike of 25 bps received a green flag from seven out of eight monetary policy committee (MPC) members as St. Louis Fed President Jim Bullard was in favor of a 50 bps rate hike this time. It is worth noting that the Fed has increased its interest rates after a span of three years. Although a 25 bps hike interest rate decision was in-line with the estimates, the announcement of seven hikes in 2022 has surprised the market. The aggressive tightening bulletin claims that the inflation mess is much worse than the estimated, which is why the Fed is looking to elevate the interest rates quickly.

US Retail Sales

The underperformance of US Retail Sales for February month has mounted concerns over the US economy going forward. The US Census Bureau reported February Retail Sales at 0.3% lower than the market consensus of 0.4% and much lower than the previous figure of 4.9%.

Major events this week: Building Permits, Housing Starts, Initial Jobless Claims, Industrial Production, and Existing Home Sales.

Eminent issues on the back boiler: Russia-Ukraine peace talks, monetary policy from Bank of England (BOE) and Bank of Japan (BOJ), Federal Reserve Bank Gov. Michelle Bowman speech.