The dollar index broke above 100.5 for the first time since May 2020, underpinned by the prospect of a more aggressive pace of Federal Reserve tightening. Some of the downward pressure seen Tuesday after a smaller-than-expected rise in US core inflation proved short-lived, suggesting markets will wait for further data to gauge if inflation is peaking.
Actually, in the aftermath of such data Fed Governor Brainard’s said that despite the welcoming signs of cooling in US consumer price inflation, the central bank was still determined to substantially shrink its asset sheet and raise interest rates several times. These remarks reassured investors that the Fed would continue to pursue what the FOMC minutes had recently shown: a 50bps rate hike next month and a monthly reduction of $95 billion in the Fed’s asset sheet.