US Dollar Index eyes to recapture fresh 19-year high as uncertainty over Fed’s rate hike firms

• The DXY looks to reclaim 103.93 amid a broader strength in the Fx domain.
• Fed’s Powell is certain to elevate the interest rates by 50 bps.
• The 10-year US Treasury yields have sensed long-liquidations after hitting 3%.

The US dollar index (DXY) is oscillating in a narrow range of 103.58-103.66 in the early Tokyo session after a mild profit-booking from Monday’s high at 103.75. The DXY bulls are still rocking and are likely to attempt for recapturing its fresh 19-year high at 103.93, recorded last week.

A rate hike by 50 bps looks certain

The Federal Reserve (Fed) is set to elevate its interest rate by 50 basis points (bps) as galloping price pressures and consistency in full employment levels are compelling for sounding aggressively hawkish on Wednesday. Well, a jumbo rate hike looks certain now as the Fed has to return to neutral rates this year. Therefore, the mathematics behind rate reversion demands more than one rate hike by half a percent out of the remaining six monetary policy meetings to shore up rates to near 2.5%. Apart from the rate hike announcement, investors should focus on dictation over balance sheet reduction and further guidance on rates.

10-year US Treasury yields kiss 3%

The 10-year US Treasury yields have touched the psychological resistance of 3% for the first time in the last three years. A mean reversion of policy rates to neutral one is indicating a tad underperformance from the global equities due to the unavailability of helicopter money and easy liquidity into the economy going forward. This is pushing the US Treasury yields higher and is likely to keep yields stronger on a broader note for a longer horizon.

Key events this week: JOLTs Job Openings, ISM Services PMI, Initial Jobless Claims, Nonfarm Payrolls (NFP), Unemployment Rate.

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, Reserve Bank of Australia (RBA) interest rate decision, European Central Bank (ECB) President Christine Lagarde’s speech, Fed interest rate decision, Bank of England (BOE) interest rate announcement.