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Dollar Sees Limited Action As Investors Predict Super Sized Interest Rate Hike

A red arrow going up between dollar coins

The dollar edged slightly higher on Friday morning as investors bet on a huge interest rate hike in the upcoming days.

The US Dollar Index rose by 0.03% to 108.57 during the early Asian trading session and looks to continue its third winning week. In terms of performance, the US dollar index has been up nearly 1.58% since last week Friday.

Speaking on the dollar’s continued resurgence, Westpac currency strategist Sean Callow stated that the momentum remains with the US dollar. He further predicted that the dollar index could reach as high as 111 in the coming weeks. Making a point for his prediction, Sean added that he expects the FOMC to remain hawkish at the July meeting and beyond. And should that be the case, the dollar will continue to push higher.

The dollar’s action is impacting all USD currency pairs

Meanwhile, the USD/JPY pair rose 0.08% and is now trading at 139.01. And with the BOJ resolute on its ultra-easy policy, analysts expect the yen to keep trailing the dollar. The AUD/USD pair dropped 0.04% and is now trading at 0.6744. The NZD/USD pair inched higher by 0.11%, trading at 0.6136.

Similarly, the USD/CNY pair is up 0.10% to 6.7634. GBP/USD pair is also not left out of the action as the currency pair rose 0.08% to 1.1832.

After hitting parity this week, the EUR/USD pair regained some ground, rising by 0.13% and now trading at 1.0029. The poor performance of the euro has been attributed to the worsening energy crisis rocking the region and the war in Ukraine.

Interest rates are expected to surge further

Elsewhere, the European Central Bank looks to stick to its quarter-point rate increase. Outside Europe, investors have raised their bets that the US Federal Reserves will announce a super-sized interest rate hike in July as Wednesday’s CPI report showed June’s inflation at a 40-year high.

In the interim, Fed Governor Christopher Waller and St. Louis Fed President James Bullard both support another 75-point basis hike for July, even with the less than impressive inflation figures.

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