Dollar Jumps as Rate Hike Expectations Pulled ForwardNov 17, 2021
The dollar has been rallying versus most major currencies since June’s FOMC meeting, hitting a 16-month high on Tuesday on the back of strengthening economic data and growing expectations for tighter monetary policy on the horizon; the Citi U.S. Economic Surprise Index is trending higher after spending nearly four months in negative territory.
The market is currently pricing in a ~75% probability of at least one Fed rate hike by June and a 100% probability of at least two rate hikes by December 2022.
While there are a fair amount of risks associated with a stronger dollar, the more critical read through is what the dollar’s recent strength implies. A stronger greenback would have you believe the same tailwinds that propelled global asset prices – including BTC and crypto – over the last 18 months are starting to reverse course, and that assumption wouldn’t be entirely misguided (stay tuned for our latest market report dropping this week for more detail).