Dollar Index Will Climb To 95.00 In 2032

🚨 🚨 Dollar Index: Get Ready For 95.00 In 2022
The Dollar Index has dropped about 10% in value since its high at 103.81 in Jan 2017
This is all about to change
The Federal Reserve is poised on Wednesday — in almost everyone’s base case — to signal that it will make a formal announcement about tapering its asset purchases at the following meeting, in November
Even IF the Fed backs down on a 2021 taper announcement due to the China chaos, we expect a taper to kick in by the end of 2022
We expect that Fed Chairman Jerome Powell in his postmeeting press conference will look to assure investors that the central bank is aware of growing risks and isn’t thinking about lifting interest rates while potentially having to acknowledge higher inflation forecasts and a more hawkish dot plot
Wall Street expects the FOMC to in November formally lay out plans to start tapering its $120 billion in monthly bond purchases
Aneta Markowska, chief economist at Jefferies, says she expects the FOMC to open the door to a possible November taper announcement, conditional on a solid September employment gain
As there is only one jobs report between now and the November meeting, economists say a decision to start reducing purchases in November will depend on the September payrolls report. Another miss, Markowska says, and the Fed could push the decision until December
Economists at Goldman Sachs expect the updated statement to say something like, “The Committee expects to begin reducing the pace of its asset purchases relatively soon, provided that the economy evolves broadly as anticipated”
Kathy Bostjancic, economist at Oxford Economics, sees Powell more signaling during his press conference that tapering is on track to start in November. That, she says, is a clearer avenue to provide further guidance compared with in the policy statement
Economists say investors have largely already priced in tapering
The Fed has to upgrade its inflation forecast for this year significantly given persistently hot readings. Even if Fed officials assume 0.1% month-over-month increases between now and the end of the year, the Fed’s favored inflation gauge would average 3.5% year-over-year in the fourth quarter, Markowska says. She notes that’s up from 3% in June, and it is well above the Fed’s longstanding 2% target
The question is whether an upwardly revised inflation forecast for this year affects members’ 2022 and 2023 inflation projections. Our Algo sees a good chance that those forecasts are also revised higher, given persistent wage pressures and rising inflation expectations. Higher inflation forecasts beyond 2021 would undermine the notion of “transitory” inflation
The updated dot plot is another place ripe for a hawkish surprise. It would only take two members to lift their dots from “no change” for half of the FOMC to expect at least one rate increase in 2022
The bond market is pricing in a near 70% chance of one rate hike in 2022 and a cumulative 75 basis points of tightening by the end of 2023

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