The US Dollar continues to strengthen, with expectations that it could reach its tenth consecutive rise. However, there are signs that this winning streak may soon come to an end. The University of Michigan’s inflation expectations indicate that participants believe the US Federal Reserve should put an end to the rise in interest rates, which could be detrimental to the Dollar.
This week’s economic calendar is light, and some selling pressure is expected until Wednesday, particularly if the Dollar fails to break higher. The Dollar Index (DXY) is currently above 105.00 but is struggling to reach new highs. If the DXY manages to close the week above 105.88, the Dollar is expected to strengthen further in the medium term. However, if the rally reverses and the 104.44 level gives way, a substantial pullback could occur.
In terms of global news, there are problems with the Euro as spreads between German and Italian 10-year bonds are soaring. Russia has also deployed an aircraft to intercept an American plane, adding to tensions. Numerous central banks, including the Swiss, Norwegian, Swedish, Japanese, and British central banks, are set to issue rate decisions this week. Crude oil prices remain high, which could lead to continued inflation in the next quarter.
The focus of attention this week will be the decision on interest rates by the US Federal Reserve. The National Association of Home Builders will publish its real estate market index for September, and the US Treasury Department will auction bills of different durations. Stock markets are mixed, with no clear direction on Monday. The CME Group’s FedWatch tool shows that markets are pricing in a 97% likelihood that the Federal Reserve will keep interest rates unchanged at its September meeting.
A central bank FAQ section explains the role of central banks in guaranteeing price stability. They adjust interest rates to control inflation and have independent policy councils made up of members with different monetary policy stances. The chair ultimately has the final say on policy decisions. Central banks try to communicate their monetary stance and outlook to the markets without causing wild swings in rates, stocks, or currencies.