The dollar gained another 0.6% on the DXY on Thursday, testing two-month highs near 92 after jumping 1% on Wednesday.
The dollar index showed the highest increase in two days since the crisis covid March after the US Federal Reserve signaled an earlier and faster increase in interest rates.
Following the results of the next meeting, the Federal Reserve improved its estimates of economic growth, raising its forecasts for inflation in the United States for the next year and bringing the expected date for raising interest rates closer. The regulator's estimates caused the USD to jump by more than 1%. This is a significant move for the foreign exchange market. The last time we saw such a sharp increase in the dollar index was only in March last year. Thus, investors were surprised by the changes presented by the Fed.
At the end of May, the growth rate of consumer prices in the United States reached the highest since 2008, core inflation set a record for 19 years, and individual metrics — in particular, the growth of commodity prices-reached peaks that the United States has not seen since the early 1980s.
The main surprise from the Fed was the change in the forecast for the key rate. If in March the Fed promised three years of zero rates, now the majority of voting members of the Open Market Committee are in favor of raising them in 2023. In addition, the Fed raised interest rates on its money market operations.
The Fed has not just acknowledged that inflation is accelerating and the economy is growing rapidly - there has been a de facto shift towards a much more "hawkish" position. All this could lead to a" moderate rally "in the dollar in the summer months, while the market waits for the central bankers' symposium in Jackson Hole in August, where the Fed is likely to give a clear signal about plans to scale back QE.