US Dollar Index (/DXY) edges higher above 103.50 following strong GDP growth in the US. Economists at MUFG Bank analyze Dollar’s outlook.

USD upside potential as growth outperforms

We now go into next week’s FOMC meeting on the back of a much stronger GDP print but still compelling evidence of disinflation. 

The tone from Fed Chair Jerome Powell is likely to remain cautious on near-term rate cuts being delivered but just like with the ECB on Thursday, a more favourable tone on inflation could be enough to keep alive expectations of a cut in March. 

The near-term US Dollar bias remains to the upside though and we look set to test and breach the year-to-date high in DXY recorded on Tuesday at 103.82.