US Dollar Index closed the first two days of the week in positive territory. Fed Chair Jerome Powell will share his thoughts on the economy and labor market at the Brookings Institute today. Economists at DBS Bank expect Powell to realign markets to the Fed’s rates trajectory.

Powell will stress that rates will only pause in 2023

“Powell will stress that rates will only pause in 2023 and remind markets that the Fed has yet to start an internal debate on where and when rates will peak. Powell should reaffirm the Fed’s intention to lift the 2023 target for rates from the 4.6% pencilled in September in next month’s Summary of Economic Projections.”

“If Powell realigns the market to the Fed’s rate trajectory, the UST 10Y yield should rise above 4% again and pull the USD higher.”