Fed: A hawkish-sounding Powell could prompt a squeeze higher in the USD – Scotiabank

The USD’s late 2022 slide has extended further through early January. In the view of economists at Scotiabank, a hawkish FOMC may lift the US Dollar.

A 25 bps hike is more or less fully priced in

“If a 1/4-point hike is more or less fully priced in, a hawkish-sounding Fed Chair Powell is perhaps not and could prompt a squeeze higher in the USD.”

“A lot needs to come together to lift the USD – a plausibly hawkish FOMC statement/Powell press conference primarily – but odds may be tilting towards a mini-squeeze (1-2%) higher in the USD in the short run.”

See – Fed Preview: Forecasts from 16 major banks, dialing down rate hike to 25 bps