The US Dollar Index (DXY) is finally breaking out to new highs as the FOMC minutes show “many” officials favour one or more 50bp hikes and an aggressive pace of balance sheet reduction. A move above 100 is on the cards in coming days, potentially extending to the 100.50-100.90 zone, economists at Westpac report.

USD yield support rebuilding back toward highs

“FOMC minutes show “many” officials favour one or more 50bp hikes and an aggressive pace of balance sheet reduction, amounting to $95bn per month, to be phased in over three months starting May.”

“With the focus now shifting to balance sheet reduction, yield differentials further out the curve should start to move more materially in the USD’s favour too.” 

“DXY 100+ on the cards in coming days; clean break there has it eyeing off a thicket of resistance extending back to 2020 in the 100.50-100.90 zone.”