The Federal Reserve should hike by 75 bps today. Economists at ING suspect that lingering data-dependency may put off pivot speculation to the next inflation report, leaving risk assets vulnerable and the dollar bid.

USD Index set to close the week above the 112.00 handle

“We are inclined to think that Chair Jay Powell will need to drop a substantial chunk of his data-dependent approach, and emphasise the risks of recession over the risks of inflation, in order to drive a substantial dollar downtrend. However, it does seem too early for this, and a risky move given the lack of evidence that inflation is coming under control.”

“With markets still left in limbo, we suspect the balance of risks for the dollar is skewed to the upside today. After all, recent price action has pointed to interest in rebuilding long-dollar positions after the late-October correction, a dynamic that remains supported by a heavily inverted yield curve, instability in the equity market and lack of alternatives to the dollar in FX given macroeconomic uncertainty (especially in Europe and China).”

“While surely a close call, we see DXY closing the week above the 112.00 handle, and moving back to the 113.00+ highs in the coming weeks.”

See – Fed Preview: Forecasts from 13 major banks, the last big hike for now?