• The DXY shoots above 100.60 as a 50 bps rate hike is on the cards.
• Investors should brace for a reversion to neutral rates at a faster pace.
• The market participants are eyeing speeches from ECB’s Lagarde and BOE’s Bailey.

The US dollar index (DXY) is displaying casual moves in a tiny range of 100.55-100.66 after a strong recovery on Thursday. The DXY has shown a solid reversal after dragging below the psychological support of 100.00 on progress in odds of a jumbo rate hike from the Federal Reserve (Fed). The speech from Fed chair Jerome Powell bolstered the chances of a 50 bps interest rate hike after stating that investors should brace for a half-a-percent rate hike in May‘s monetary policy.

Fed’s Powell speech at IMF

The appearance of Fed’s Powell at the International Monetary Fund (IMF) brought a sharp reversal in the DXY as Powell reiterated that the tight labor market and soaring inflation are compelling the Fed to move faster to the neutral rates than to the pace adopted in previous hike cycles. In order to push the current Consumer Price Index (CPI) figure of 8.5% to the targeted figure of 2%, Fed will need to invest a lot of effort and determination as current price pressures are hurting the economy.

Key events next week: Durable Goods Orders, Consumer Confidence, Housing Price index, Gross Domestic Product (GDP) data, Personal Consumption Expenditure Prices, Michigan Consumer Sentiment Index (CSI).

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, International Monetary Fund (IMF) meeting, European Central Bank (ECB) President Christine Lagarde speech, and Bank of England (BOE) Governor Andrew Bailey speech.