Topic: Weekly FX Report

After Fed chair Jerome Powell pushed back on expectations earlier this month, this week’s hotter than expected US inflation report was the final nail in the coffin. The USD index hit new three-month highs with the greenback’s best performance versus the low-yielding currencies like the Swiss franc and Japanese yen.

Cross-market volatility levels remain compressed as expectations of early rate cuts from the Federal Reserve (Fed) sway. The Fed is in a holding pattern and the likelihood of a rate cut in March is priced at less than 20%, a significant decrease from the approximately two-thirds chance anticipated at the beginning of the year.

The ongoing strength of US economic data and company results has seen US equities push higher despite growing uncertainty around potential rate cuts. The US dollar has also gained.

US equities are near record levels and the US dollar is broadly rebounding. We recap what has moved markets this week.

The USD gained after officials successfully pushed back against elevated policy easing expectations, yet US shares still made new highs.

US inflation remained hot but has not risen enough to change neither markets, nor the Fed’s perspective on monetary policy