US Dollar Expected to Rise Further Amid Strong Economic Data

The US Dollar is expected to continue its bullish trend in the coming months, according to bank analysts. High US Treasury yields, strong US data, and monetary tightening by the Fed are seen as key drivers of demand for the USD.

The Federal Reserve is expected to hike interest rates between three and four times in the next 12 months. The recent decline in jobless claims highlights a firm labour market, with the risk of an upside payrolls surprise increasing.

Rabobank notes that USD net longs are largely unchanged, while the OIS curve suggests investors are still positioned for more than three hikes by the end of next year. MUFG/BTMU highlights that the US rate market now expects the Fed to deliver 'almost another 100bps of rate hikes in the year ahead', reinforcing support for the USD.