The USD has long led from the front and has not yet hit the “wall.” Economists at HSBC expect the US Dollar Index (DXY) to test the 115 level.

Fed to deliver a widely expected 75 bps hike

“We look for the USD uptrend to extend, with DXY likely to challenge the top end of its recent trading range of 110-115.”

“The key US-centric pinch-point for the USD is the 1-2 November Federal Open Market Committee (FOMC) meeting. The Federal Reserve (Fed) is likely to deliver a widely expected 75 bps hike and is expected to argue a data-dependant outcome in its forward guidance, with the market currently priced in an 88% chance of a 75 bps follow-up hike in December (Bloomberg, 20 October 2022).” 

“We think that the tightness in the labour market (likely reflected in the US employment report for October to be released on 4 November) will continue to foster concerns about service-driven inflation pressures even as core goods inflation slows. The renewed pick-up in gasoline prices since mid-September, together with food prices and other energy prices, is putting upward pressure on US CPI. The inflation for October will be released on 10 November.”