• The DXY has registered a fresh three-week high at 104.36 on soaring inflationary pressures.
• Higher US CPI has unfolded the chances of a rate hike by 75 bps by the Fed.
• Weak Michigan CSI displays that inflation has dented the confidence of consumers.

The US dollar index (DXY) is advancing sharply higher as soaring price pressures have infused fresh blood into the asset. The DXY has breached above its previous consolidation range, which placed in a narrow range of 104.04-104.21 on Friday after an initiative buying structure near 103.12.

A 75 bps interest rate hike looks likely

The release of the US Consumer Price Index (CPI) at 8.6%, above the expectations, has opened doors for a rate hike announcement by 75 basis points (bps). The Federal Reserve (Fed) has already hiked its interest rates by 25 bps and 50 bps in March and May’s monetary policy announcements respectively. However, no effect has been witnessed yet although price pressures are still soaring higher. Therefore, the Fed will deploy its all quantitative weapons to tighten the policy and corner the inflation.

Weak Michigan Consumer Sentiment Index (CSI)

The University of Michigan reported the Michigan CSI on Friday at 50.2, significantly lower than the consensus of 58 and the prior print of 58.4. Higher price pressures have dampened the confidence of the consumers in the economy, which could hammer the DXY going forward.

Key events this week: Producer Price Index, Retail Sales, Building permits, Initial Jobless Claims.

Major events this week:  Fed interest rate decision, Eurogroup meeting, Swiss National Bank (SNB) interest rate decision, Bank of England (BOE) interest rate, Bank of Japan (BOJ) rate decision.