Where we are: The DXY is trading at 101.28, up 0.26% on the day and pushing towards the highs seen last year. This move has occurred with European cash markets well underway and ahead of the US 08:30 ET data prints. We’re seeing a clear bid under the Greenback, extending the overnight strength and challenging key technical resistance.
What’s driving it: The primary driver remains the Federal Reserve’s hawkish pivot. Last week’s decision to hold rates but strip out easing bias and remove a 2026 cut from the dot plot has firmly re-anchored expectations for a potential hike this year, especially with inflation still elevated near 4% due to the Middle East energy shock. This hawkish hold is translating into higher US yields, with the 2Y and 10Y both ticking higher overnight, and is directly supporting the Dollar’s ascent. The recent slide in WTI crude, down nearly 4.5% as of June 15th, is a secondary tailwind, reducing some of the immediate inflation pressure but not enough to derail the Fed’s current stance.
- The Fed’s hawkish hold, with a median dot plot implying a possible hike this year, is the dominant signal.
- US 10Y yields are firming, trading at 4.491% (+0.40% d/d), reinforcing the higher-for-longer narrative.
- Speculative positioning shows a crowded long in USD futures, with net non-commercials at +13,197 contracts, a 98th percentile reading, signalling significant squeeze risk on any disappointment.
NY session focus: The 09:45 ET release of the Flash Manufacturing and Services PMI data will be the immediate focus. Expectations are for a slight dip in Manufacturing PMI to 54.6 (prev. 55.3) and a modest rise in Services PMI to 51.1 (prev. 50.9). A print significantly above forecast could further cement hawkish Fed expectations and extend the Dollar’s rally, while a weak print might offer some temporary respite. The trade that’s working is long USD, expecting further upside. The trade at risk is any significant softening in the US data that forces a reassessment of the Fed’s hiking path. The pain trade here is a sharp reversal in the Dollar as positioning unwinds rapidly on a dovish data surprise.