JPMorgan Chase & Co expects the dollar to extend its gains even after the Federal Reserve starts raising interest rates.
“The market is still in some sort of price discovery mode,” Daniel Hoy, executive director of global FX strategy at JPMorgan Securities, said in an interview with Bloomberg TV, and “the dollar’s peak usually comes one to two months after the Fed raises rates.” ».
The market is trying to chase after the Fed, because this is clearly a very unusual economic cycle, said JPMorgan’s Daniel Hoy.
“The Fed initially expected to ease price pressures if the supply chain problems related to the epidemic were resolved, but recently acknowledged that it is taking longer than expected,” Howe said.
Daniel Hoy noted that JPMorgan prefers to buy dollars against lower-yielding currencies such as the euro and the yen, which are the currencies of two countries where “central banks” are lagging behind the Fed.
Expectations of 5 rate hikes this year are rising after hawkish comments from Fed Chairman Jerome Powell last week, with Goldman Sachs raising its expectations in this regard.
The Federal Open Market Committee may choose to raise its benchmark rate by 50 basis points in March if a more aggressive approach is needed, Rafael Bostic, president of the Federal Reserve Bank of Atlanta, said recently in an interview with the Financial Times.
Powell’s comments reignited bullish trading, sending the Bloomberg spot dollar index to its strongest level in 18 months late last week, and by about 5% last year after increasing two-year Treasury yields to pre-pandemic levels.