USD to continue benefiting from aggressive tightening from the Fed – Wells Fargo

Despite more hawkish central banks around the world, analysts at Wells Fargo still see the “aggressive tightening from the Federal Reserve” as supportive of the US dollar over the medium to longer term. They expect the Fed to remain at the forefront of major central bank tightening, and they see two 50 bps hikes and a more pronounced tightening cycle compared to last month. 

Key Quotes: 

“Despite more hawkish foreign central banks, we maintain our view that aggressive tightening from the Federal Reserve should support the U.S. dollar over the medium to longer term. We expect the Fed to remain at the forefront of major central bank tightening, and now expect two 50 bps hikes from the Fed and a more pronounced tightening cycle compared to last month.”

“In our view, the Fed will likely be one of the more hawkish central banks in the world, which could boost the U.S. dollar. While the greenback should remain strong, we nonetheless believe the extent of U.S. dollar strength and foreign currency weakness may be mitigated to some extent by foreign central banks also raising policy rates faster and by more than previously expected.”