Investing.com – The U.S. dollar hit its highest level in nearly five months on Tuesday, and Macquarie is advising traders to remain long the dollar for even greater gains.
The index rose to 105.1 on Tuesday, its highest level since Nov. 14, adding to sharp gains on Monday after U.S. data unexpectedly showed manufacturing output rising for the first time since September 2022.
The stronger-than-expected data sent US bond yields soaring, with the benchmark 10-year yield rising to 4.40%, supporting the dollar.
“We weren’t too surprised by the bond market’s reaction, as we had been saying since mid-March that the bond market turmoil was not over yet and that the 10-year yield would rise back to February highs. around 4.35%,” Macquarie analysts said in an April 2 note.
Relatively strong US data will make the data-dependent Fed more cautious about cutting its policy rate, with caution also driven by strong inflation figures in January and February and the risk of negative supply shocks.
This brings attention to this week’s Federal Reserve speeches as they could be a new catalyst for the dollar’s rise, “as they may indicate that Powell’s dovishness is not representative of either the Fed’s nineteen points or the FOMC median, which is more hawkish.” – said Macquarie.
The bank’s analysts expected the dollar to remain strong at least during the critical period between now and the release of March US inflation reports.
“This is because the US dollar will do well against major currencies (EUR, GBP, CAD, AUD) when US economic data continues to be relatively outperforming, when inflation remains a greater threat in the US than in Europe, and when emerging geopolitical concerns. again.”