Dollar heads higher again if hinting at higher-than-expected neutral policy rate

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The possibility of a rate cut could weigh on the dollar.

If there is any sign or hint that the neutral policy rate could be higher than currently expected, this could be the catalyst for a fresh round of dollar appreciation. Essentially, this would signal that the Fed may be willing to let rates go higher before announcing the completion of its monetary tightening cycle.

On the other hand, if there is a lot of talk or emphasis on the possibility of an eventual Fed rate cut, this could send the dollar lower and back into the lower half of this year’s trading range.