The dollar index continues to climb highs. Besides, the level of 96,00 is very close. Today was a test of that level. The buyers did not manage to consolidate over it at once. However, it is a matter of time.

The US dollar's momentum was caused by the strong retail and production data. According to the market participants, they increased the probability of the Fed's course reorientation towards a stricter monetary policy. Besides, several Fed officials delivered speeches. St. Louis Fed president James Bullard called for a more hawkish direction, while his San Francisco counterpart Mary Daly said the regulator should not draw hasty conclusions on the fight against high inflation.

The Fed's position is unclear, and investors have difficulty figuring out which policy the Central Bank chooses. However, the bank managers consider a first rate hike in the middle of next year, immediately after the end of the stimulus cut.

Time will tell the significance of these measures. Disappointment with this strategy will lead to an anti-rally of the currently surging dollar. Investors stand their ground, though the position of the Fed itself and views of some authoritative analytical companies are contrary to expectations of the markets.

TD Securities representatives believe that investors do not accept the Fed. The key issue is that they are not willing to do it. According to analysts, the regulator will not raise interest rates before the end of 2023.

TD Securities chief commented in an interview with Bloomberg that the market was pricing in the first rate hike after the curtailing of the stimulus is complete. He noted that the Covid-19 pandemic had a big impact on inflation, which would start to slow down. TD Securities representative added that the growth rate would slow and inflation would hit highs.

Currently, investors stick obstinately to their tactic and push the dollar to new highs. However, dollar buyers have other reasons, though not as significant as the expected rate hike.

Joe Biden signed the long-awaited $1 trillion infrastructure spending bill which is considered the factor of the US currency rise. This big package could be another source of growth in consumer prices and could raise inflation by 0.3-0.5% during the year. If it occurs, the regulator will have even more arguments to raise the rate.

Powell or Brainard?

This week, traders will focus on the Fed personnel reshuffle. On Tuesday, Biden promised to decide on the candidate by the end of the week. Despite the fact that the vast majority believes that the US president will not dismiss Powell, some uncertainty is obvious. Besides, it exerts influence on the dollar.

What should the markets expect from this decision? The change in the policy or positioning of the Central Bank will not bring any changes, at least the changes that investors expect the most. Both candidates are dovish and have similar views on the current situation. However, Brainard is even more cautious about cutting the stimulus.

There is no point in replacing one credible financier with another. Unless Biden wants to humiliate Powell implicated in the Fed financial scandal. He might just change the current Fed chief for a similar candidate.

However, there are differences between the candidates. It is more obvious concerning financial regulation and a more modern approach. Brainard is known to be a proponent of the digital dollar.

If Biden decides to nominate Powell for a new term, then there is a possibility that Brainard will take the position of deputy chairman. It's a rather legitimate scenario.

The chances of the two contenders for the Fed chief post are almost identical. However, Brainard gets slightly more chances. The insider trading scandal hit Powell's reputation hard. Evidently, Biden takes a key decision. Besides, he is an expert in springing surprises. Traders just have to wait until the weekend. However, I assume that the market will have to react to this nasty surprise.

The dollar continues to consolidate globally and is expected to strengthen its rally. If the current highs in the index are absorbed, the market will face resistance near the round level of 97.00 and then at 97.80, which is used as the high from June 30, 2020.