US Dollar Index turns volatile at open, growing recession fears trim hawkish Fed bets

• The DXY has turned wild as market participants trim their positions after a long weekend holiday.
• The dual stalwarts of confident Fed: solid growth prospects and labor market have started fading away.
• Fed’s minutes will be more clarifying on the announcement of a bumper rate hike.

The US dollar index (DXY) has gyrated in a wide range of 104.81-105.25 at the open as an elevated weekend amid holiday on account of US Independence Day was expected to bring wild moves in the counter. The DXY is expected to continue displaying topsy-turvy moves as investors have shifted their focus to the Federal Open Market Committee (FOMC) minutes, which will release on Wednesday. A detailed clarification of the ideology of the Federal Reserve (Fed) policymakers on voting for the 75 basis points (bps) interest rate hike will be crucial for making informed decisions on the further direction of the DXY.

Lower growth prospects have trimmed extreme hawkish Fed bets

The release of the downbeat US ISM economic data last week has cleared the policy tightening measures from the Fed may have not shown their impact on inflation but have started affecting the economic activities. The dual stalwarts of confident Fed: solid growth prospects and employment generation ability have started fading away.

On Friday, the US ISM reported the Manufacturing PMI and New Orders Index were extremely lower than the estimates and their former releases. And, now a vulnerable performance is expected from the US employment data. As per the market consensus, the US agency will report the Nonfarm Payrolls (NFP) at 270k, much lower than the prior print of 390k. However, the Unemployment Rate will remain stable at 3.6%.

Key data this week: Factory Orders, S&P Global PMI, ISM Services PMI, JOLTs Job Openings, ADP Employment Change, Initial Jobless Claims, Nonfarm Payrolls (NFP), Unemployment Rate.

Major events this week: Reserve Bank of Australia (RBA) interest rate decision and Federal Open Market Committee (FOMC) minutes