Dollar Strengthens on Fed Rate Hike Expectations and Energy Price Spike
US Dollar (USD) gains are holding strong after hawkish comments from Federal Reserve member Kevin Warsh and a renewed spike in energy prices. Markets are now expecting a rate hike in September, which is supporting the dollar's rise.
According to ING's Chris Turner, the cyclical Fed story can outweigh concerns about dollar debasement. He believes that the dollar will grind higher towards 100.10/20 and expects it to move slightly higher tomorrow on the Waller event.
The long-end US bond dynamics are also a concern for traders, with fears of Treasury Secretary Scott Bessent using his toolkit to support the bond market and drive up demand for the Swiss franc (USD/CHF). However, Turner argues that the Fed's decision to hike rates in September will likely trump these concerns.
The yield curve steepening from the long end could potentially drag the dollar lower if traders are correct about the pressure on long-term bonds. But for now, the market consensus is pointing towards a stronger US dollar.