The US dollar was pushing higher today as the outlook for monetary tightening turned into a more hawkish one after comments of Federal Reserve officials.
Markets have discounted an interest rate hike in the near future after the Fed issued a dovish statement and reduced the expected pace of monetary tightening last week. Yet the market sentiment shifted after several officials talked about necessity of a rate increase, perhaps as soon as the next month. The comments returned the appeal to the dollar.
The probability of an April hike on the CME FedWatch page has doubled. Now it stands at 14% compared to yesterday’s 7%. Certainly, the probability remains very low, but the shift in the sentiment should not be ignored as it may determine performance of the US currency in the near future.
EUR/USD dropped from 1.1214 to 1.1180 as of 17:43 GMT today. GBP/USD sank from 1.4212 to 1.4096. USD/JPY edged higher from 112.38 to 112.59.
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