The US Dollar Index (DXY) built on the previous week's gains and climbed above 109.00 on Monday. The combination of a hawkish Federal reserve and continuing concerns about global growth should ensure the USD to strengthen slightly in the next few weeks, economists at HSBC report.

Higher new median policy rate projections may be sufficient to push the USD higher

“Our expectation of a re-run by Fed Chair Powell of the existing narrative and a market justifiably finely balanced between 50 bps and 75 bps hike supports the case for the USD to track sideways. However, we think other considerations, like higher new median policy rate projections (in particular a higher terminal rate projection), may be sufficient to push the USD higher.”

“We expect the USD to be supported by both rates and risk aversion (to be elevated on global slowdown) in the next few weeks.”