FXStreet reports that economists at MUFG Bank said that the US Dollar Index could reach new highs in case the DOTs surprise to the upside.

“Market participants are understandably wary of the Fed delivering another hawkish surprise like in June when the Fed last updated their projections for the Fed Funds rates, which is encouraging a stronger US dollar.”

“We do not expect the Fed to announce their QE taper plans this week but we do expect Chair Powell to repeat that if the ‘economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year’.

“If the DOTs confirm a median hike in 2022 that would illicit the biggest FX reaction with the DXY likely to trade at new year to date highs. A 2022 median DOT would clearly undermine Powell’s attempts to break any link between tapering and rate hikes.”