The research firm DBS said on Monday that the U.S. dollar is likely to find support when the futures market start discounting the U.S. interest rate hike cycle. DBS expects the interest rates in U.S. to increase in about six months or 3-4 FOMC meetings from the day the "extended period" phrase is removed from the central bank's statement.
The U.S. Federal Open Market Committee is scheduled to announce its decision on interest rates on March 16. Even though the market is not expecting the Fed to alter its statement relaying its intention to 'keep rates at exceptionally low levels for an extended period' at the meeting, it is believed that the Fed is preparing for an eventual interest rate hike, the first following the current downturn. Hence investors are looking for signs on how the Fed will signal the rate hike.
DBS noted that the speculative net short euro positions rose to another all-time record high despite the recovery in the euro-dollar pair. The research firm also noted that the Euro-zone officials continued to agree to disagree on whether Greece needs a bailout and if the region needs a European Monetary Fund.
Also, the Euro-zone officials and the ratings agencies remained unsure if Greece could deliver on its austerity budget pledges and regain its credibility. Greece is expected to report to the European Union tomorrow on its progress.
While noting that Portugal is also on the watch list of the rating agencies, DBS said that it is still premature to conclude the worst is over for the euro.
Similarly, Washington and Beijing officials are agreeing to disagree on the need for the Chinese yuan to resume its appreciation. As long as US-China tensions continue, markets are beginning to worry about a wild card and DBS noted that CNY inaction may lead China to be named a currency manipulator in next month's US Treasury Currency Report.
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May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.