US Dollar Index aims an establishment above 105.00 as Fed rate hike ghost returns

• The DXY is hoping for a break above 105.20 on advancing hawkish Fed bets.
• Investors are ignoring the one-time slowdown in the US Inflation rate.
• A higher US Michigan CSI will strengthen the DXY bulls further.

The US dollar index (DXY) extended its gains to near 105.20 after sensing an intense buying interest while revisiting the six-week low at 104.64. The asset defended itself from refreshing a six-week low below 104.64. Now, the DXY has turned sideways but remains above 105.00 and is expected to record more gains on violating the immediate hurdle of 105.20.

Inflation exhaustion signals fade

Markets were cheering a downward shift in the US Consumer Price Index (CPI), which landed at 8.5% lower than the expectations of 8.7% and the prior release of 9.1%. Now, investors have started focusing on the extent of the interest rate hike by the Federal Reserve (Fed) in its September monetary policy meeting.

A one-time slowdown in the US inflation is not sufficient to have a ball as price pressures are still extremely deviated from the desired levels. Therefore, the Fed will continue on its path of accelerating interest rates. For the record, the extent of hawkish guidance will trim abruptly.

US Michigan CSI eyed

The Michigan Consumer Sentiment Index (CSI) data is expected to improve to 52.2 from the prior release of 51.5. A consecutive improvement is expected in the confidence of consumers after the data slipped to 50 for the first time in the past 20 years. An occurrence of the same will display that consumers have started showing their confidence in the economy and the overall demand will improve going forward.