Hawkish Fed to keep the dollar supported – ING

So far, it has been a good year for the US dollar. Economists at ING expect this trend to largely continue as Fed’s dot plot is likely to shift up.

Ending the year with a bang

“Wednesday's FOMC meeting should see the Fed shift its stance on inflation and announce a faster pace of tapering of its bond purchases. We are also particularly interested in the Fed Dot Plots, which we believe turned the bearish dollar trend around in June this year. Assuming the Fed does shift to a median expectation of two hikes in 2022, we would expect US money market rates to push higher again, taking the dollar with it.”

“We think nearly three weeks of consolidation have seen the dollar correct from its overbought levels in late November and a hawkish Fed can be the catalyst for pushing DXY to new highs for the year.”