FXStreet reports that economists at Westpac discuss US Dollar Index prospects.

“Chair Powell’s testimony tripped up the DXY with the message that achieving substantial progress and a withdrawal of support are both still a way off. But that doesn’t alter the picture of an economy that is more convincingly finding its feet. With a more secure ‘post-covid’ growth path unfolding, Covid-related job losses should be recouped in a more consistent fashion going forward.”

“The puzzling fall in US yields complicates the constructive USD outlook, but it’s mostly a curve flattening story and a recalibration of inflation expectations following the Fed’s hawkish pivot. In any case, the ECB is reinterpreting its price stability mandate and shifting to a structurally more dovish policy stance.” 

“Chair Powell’s more cautious message likely injects some two-way risk into DXY near-term but a test of the March 2021 93.45 highs remains more likely than not as taper talk rises to a crescendo in Q3.”