On May 29, analysts at UniCredit Bank said in a note that expectations of further rate hikes by the Fed should keep the dollar strong, limiting its losses despite the debt ceiling deal between President Joe Biden and House Speaker McCarthy holding back demand for hedging.
“We suspect that this (debt ceiling deal) may not be enough to substantially dent the strength the dollar has shown over the past few weeks,” analysts said.
U.S. money markets revived expectations for another rate hike by the Fed in July and sharply reduced the chances of a rate cut in late 2023 and early 2024, “which could continue to support the dollar.