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Stronger US dollar increases likelihood of another Fed rate hike

April 11, 2023

A stronger US dollar increases the likelihood of another Fed rate hike

The probability of a 0.25% Fed interest rate hike at the May meeting is on the rise due to the strengthening US dollar. Before the Nonfarm report on Friday, the probability of a rate hike was at 60%. However, after a strong labor report, the probability increased to 70%. As of Monday’s close, the probability had further increased to 80%, driven by rising Treasury yields and a rally in the dollar index.

What this means for traders

Traders may need to adjust their portfolios to account for the possibility of a Fed rate hike. The market trends and asset valuations could shift as investors react to the changes in borrowing costs and currency values. Traders should stay informed and pay close attention to market sentiment and economic data leading up to the May meeting in order to make well-informed trading decisions.

What this means for news traders

News traders may find opportunities to profit from market volatility if a rate hike does occur. By closely monitoring the latest economic data releases and central bank announcements, they may be able to capitalise on market movements before others. However, it’s important to remember that trading news can be risky and unpredictable, and traders should always use caution and a solid risk management strategy.

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“Time makes more converts than reason.” – John C. Bogle

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