US Dollar Index to remain sticky around 98.50 ahead of Fed Powell’s speech

• The DXY has turned sideways in the absence of any potential trigger for further guidance.
• Goldman Sachs sees two 50 bps rate hikes and an interest rate at 2% by the end of 2022.
• Fed Powell’s speech may act as a key driver going forward.

The US dollar index (DXY) has entered into a tad wider range of 97.73-99.20 as investors await a major trigger that may dictate the direction of the greenback after an announcement of an interest rate hike by 25 basis points (bps) last week and delay of a ceasefire between Russia and Ukraine.

Fed Powell’s speech

The Federal Reserve (Fed) has announced seven interest rate hikes by the end of 2022 and the aggressive tightening stance has already underpinned the US Treasury Yields. The benchmark 10-year US Treasury yields has jumped above 2.38%. Despite the confirmation of six more interest rate hikes this year, investors are focusing on Fed Chair Jerome Powell’s speech on Wednesday. The speech is likely to dictate the action plan of elevating the interest rates.

Goldman Sachs said that they now see “two 50 basis point hikes starting with the next meeting (May and June), followed by four 25 basis point hikes into the end of the year.” Also, Goldman Sachs sees rate hikes to 2% by the end of 2022.

Well, a 50 bps rate hike has started gaining traction as traders are pricing in a 66.1% chance of a 50 bps hike at the Fed's May meeting, according to CME's FedWatch Tool, which is up from 50% chances unfolded a week ago.

NATO meeting and EU summit

US President Joe Biden will meet with other NATO allies in Brussels on Thursday to project a roadmap for a diplomatic solution to the ongoing slaughter of Ukraine by Russia. However, investors should be ready for more sanctions on Russia as an outcome of the meeting.

Apart from that, the summit of European Union (EU) leaders will also be attended by US President Joe Bide to discuss the embargo on Russian oil by EU members. Germany has denied withstanding the decision of banning Russian oil in the current scenario.

Major events this week: New Home Sales, Durable Goods Orders, Initial Jobless Claims, Market PMI (Manufacturing and Services), and Michigan Consumer Sentiment.

Eminent issues on the back boiler: EU Leaders Summit, NATO meeting, and Fed Powell’s speech.