The US Dollar Index is trading at its highest level in more than ten days above 113.20. Economists at Société Générale believe that DXY could reach the 2001 high of 121 on a break past 114.80.
The U.S. dollar rose for a fourth straight session on Monday as investors looked to inflation data later this week that is likely to show that price pressures remain elevated in the world’s largest economy, keeping the Federal Reserve’s aggressive monetary policy on track to continue until next year.
U.S. data due on Thursday is forecast to show that headline inflation came in at a hot 8.1% year-on-year rate in September, but down from 8.3% in August. Core inflation is expected to have risen to 6.5% from 6.3% previously.
Chicago Fed President Charles Evans on Monday said inflation is much more persistent than the U.S. central bank initially thought. But he noted that the Fed may still be able to lower inflation without a sharp rise in unemployment and without pushing the economy into a recession.
U.S. data last Friday showed that unemployment unexpectedly fell and the economy added more jobs than predicted in September. That pushed up bond yields as traders increased their bets the Fed would hike interest rates by 75 basis points in November for the fourth meeting running.
“By illustrating continued strength in the labor market, Friday’s non-farm payrolls report gave the Fed carte blanche to continue raising rates,” said Karl Schamotta, chief market strategist, at Corpay in Toronto.
He added that the minutes from the Fed’s last meeting, due on Wednesday, “are likely to show policymakers remain willing to inflict serious economic pain on the U.S. and global economies as they try to bring down inflation.”
Dollar Index Long (Buy)
Enter at: 113.468