Dollar rises as markets price in 41 bps of rate hikes
The dollar is gaining ground as markets shift to favor a more hawkish Fed. Fed funds futures are now pricing in ~41 bps of rate hikes by year-end.
The first full 25 bps rate hike is almost fully priced by September. This change in outlook is driven by ongoing inflation pressures and supply chain disruptions.
The EUR/USD is down 0.2% to 1.1445, while GBP/USD is closing back on its opening gap low. The dollar’s strength is also influenced by the fragile US and Iran framework agreement.
The situation in the Middle East remains a key factor in the Fed’s stance, with all roads leading back to Tehran.