Scotiabank strategists Shaun Osborne and Eric Theoret report that the US Dollar Index (DXY) is experiencing a decline for the third consecutive session, signaling a loss of upside momentum in the recent May–June rally [1]. The strategists attribute this easing to fading expectations of further Federal Reserve rate hikes, with swaps now pricing in less than 20 basis points of tightening by September [1]. This shift in market sentiment comes as both markets and forecasters had recently begun to embrace the possibility of a more hawkish Fed and a stronger dollar, but the latest price action suggests a bearish pause [1].
According to Scotiabank, corrective pressure may push the DXY back toward the 100.50/60 area, indicating a potential retracement from its recent highs [1]. The strategists highlight that the late-week price action in the DXY signaled this bearish pause, reinforcing the view that the dollar's rally is losing steam [1].
No specific market reactions or analyst opinions beyond the strategists' outlook are provided in the article, and there are no forward-looking statements regarding broader market implications or impacts on other asset classes [1].
CONCLUSION
The US Dollar Index is under corrective pressure as expectations for further Fed rate hikes diminish, with swaps pricing in less than 20bps of tightening by September. Strategists suggest the DXY could retrace toward the 100.50/60 area, reflecting a bearish pause in its recent rally. Market sentiment appears moderately negative for the dollar in the near term.