The last week has been pretty erratic, will it continue?
The dollar continued to benefit from the fact that the Russian-Ukrainian war has so far shown no signs of abating. The recent monstrous rises in commodity prices have fueled concerns about a severe inflationary shock, which has reinforced bets on an imminent start to Fed policy tightening and pushed US bond yields higher. Therefore, the market's attention now turns to the next two-day monetary policy meeting of the FOMC, which begins on Tuesday.
Meanwhile, hopes for a diplomatic solution to end the Russian-Ukrainian conflict could limit gains. Mykhailo Podolyak said that Russia is starting to speak constructively and that we will get results in a few days. The latest optimism emerged from a generally positive tone in equity markets, which tends to weigh on demand for traditional safe-haven assets, including the greenback.
Traders could also draw inspiration from the overall risk sentiment of the market and US bond yields, which would boost USD demand. Additionally, the momentum in oil prices could give the majors some momentum and allow traders to seize some short-term opportunities.