This week, which is shorter due to holidays, ING economists anticipate a solid US inflation report on Friday. They examine the prognosis for the US dollar (USD).

DXY can advance to the 105.00 zone

The US core PCE deflator for February is released on Friday, which is also a public holiday in many parts of the world. This is the week’s most important release. A month-over-month figure of 0.3% is widely agreed upon to be inadequate for the Fed’s disinflation story.

But there are also many Fed speakers this week. We would draw attention to the important speeches by Fed Chair Jerome Powell on Friday and influential Christopher Waller on Wednesday. We are interested in learning more from the Fed regarding the issue raised by Chair Powell during last week’s FOMC press conference—namely, that early-year inflation readings appear overly robust due to flawed seasonals.

It is difficult to argue against the Dollar at the moment due to the rising US stock market and the consequences for US confidence and consumption; yet, DXY may increase to the 105.00 region. However, we still believe that this strength is only transitory, and we would instead position ourselves for a second-quarter decline.