The U.S. Dollar Surges to a Five-Month High
Macquarie Advises Traders to Stay Bullish on the Dollar
The U.S. dollar reached its highest level in almost five months on Tuesday, with Macquarie recommending traders to maintain a long position on the greenback as further gains are anticipated.
Strong U.S. Data Boosts Dollar
The dollar index surged to 105.1 on Tuesday, marking its peak since November 14, following significant gains on Monday triggered by unexpectedly positive U.S. manufacturing data. The release of the stronger-than-expected data led to a sharp increase in U.S. yields, with the 10-year yield climbing to 4.40%, providing crucial support for the dollar.
Macquarie’s Insights on Market Response
“We haven’t been surprised by the bond market’s reaction, as we have been anticipating a rise in 10-year yields back to their February highs,” stated analysts at Macquarie in a note dated April 2. They emphasized that robust U.S. data could influence the Fed to adopt a more cautious approach towards rate cuts, especially in light of high inflation figures in recent months.
Fed Speeches Could Drive Dollar Gains
Macquarie highlighted the significance of Federal Reserve officials’ speeches this week as potential catalysts for further dollar appreciation. These speeches could reveal a less dovish stance than that of Chair Jerome Powell, suggesting a more hawkish outlook for the Fed.
Expectations for a Firm Dollar
Looking ahead, Macquarie’s analysts predicted that the dollar would remain strong, particularly leading up to the release of the March U.S. inflation reports. They emphasized that the U.S. economic data’s outperformance, coupled with inflation concerns and geopolitical tensions, could bolster the dollar against major counterparts like the Euro, Pound, Canadian Dollar, and Australian Dollar.
