US Dollar Forecast & Analysis: Positive investor sentiment on USD

USD ($) has shown strong resilience and survival for consecutive two months now, especially as the Russia Ukraine crisis escalates. The dollar index has similarly risen to a new ATH nearing 100.

The US dollar is beginning the new week strong again and performing strongly over any base currency matched against it. We expect the dollar to continue in its bullish momentum this week or at most remain neutral. This is based on several supportive reasons.

 

Firstly, the Fed policies are currently tightening the dollar value. The Fed is poised to start raising the interest rates and eventually reduce the size of its balance sheet and further set to reconsider raising rates by 50bp.

Similarly, there are currently high expectations for the Fed’s terminal rate to be priced above 2.00%, making the US dollar a safe haven for investors for the rest of the year if achieved.

Of course, the longer it takes to achieve inflation, the better the greenback’s chances of continuing on its bullish track.

Also, as long as the Russian Ukraine war lingers, the dollar would be a safe haven for investors.

 

Above all, the US is preparing for the first-rate hike in 2Q. Further accumulation of inflationary data and strong wage growth will point to more aggressive Fed action giving the dollar a more privileged position over other pairs.

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