Dollar bulls to continue stampede as hawkish Fed speak to boost Treasury yields

Investing.com -- The dollar will likely continue flexing its muscles against its rivals as the recent explosive jump in Treasury yields could keep going as Federal Reserve speakers are poised to reiterate the need for the Fed to remain cautious on cutting rates too early.   

If the pattern of last week continues, the Fed speakers slated for this week "will sound hawkish, as they try to put daylight between themselves and Jay Powell's 'dovish' tone from March 20," Macquarie said in a note, adding that there is room for the dollar to strengthen alongside the rise in US yields heading into the consumer inflation report on Wednesday. 

"We forecast a 0.29% rise in headline CPI, reflecting higher energy (+0.7%) and food (+0.2%) prices.  Our forecasts would lower the year-on-year rates to 3.70% for the core and 3.37% for the headline," Goldman Sachs said in a note.

Fed speakers could point to the cost of an 'early cut,' Macquarie said, though may also point to the possibility that the Fed's estimates of the US's neutral rate may need to rise further. 

Last week, Fed speakers sounded the alarm on cutting rates too early, with Minneapolis Federal Reserve Bank President Neel Kashkari grabbing the headlines after floating the idea of no rate cuts this year should inflation continue to move sideways rather than lower. 

Kashkari, President Austan Goolsbee, New York Fed President John C. Williams, Atlanta Fed President Raphael Bostic, Francisco Fed President Mary C. Daly are among the Fed speakers due this week. 

Fresh remarks from Fed speakers are set to arrive just as the latest consumer inflation reading as well as the Fed minutes for its March meeting are released on Wednesday. 

The euro, meanwhile, may also face pressure from a more dovish European Central Bank. The ECB meets Thursday, with some speculating that there could chance, albeit small, of rate cut.

“I think this week is actually a live meeting as far as the ECB is concerned, though June is probably more likely when they’re going to cut first,” Bank of New York Mellon’s Geoff Yu told Bloomberg.