Fed vs. inflation

The dollar strengthens on a hawkish Fed: "Can continue"

The dollar rises to its highest level since November last year as the market increasingly leans towards the Federal Reserve raising interest rates this year. Bloomberg reports.

On Tuesday, the dollar strengthened 0.4 percent against a basket of currencies. This parallels the fact that the market is now pricing in nearly two interest rate hikes of 25 basis points in the US by the beginning of next year.

At the same time, there is room for the dollar to strengthen further, according to Mizuho strategist Jordan Rochester.

- The dollar tends to rise ahead of Fed hikes, and the market is playing with the idea that a hike cycle could begin in September, he says.

UBS goes against the interest rate hawks – predicts a cut next year

Following the Federal Reserve's interest rate decision last week, the fixed income market is now pricing in two interest rate hikes from the US central bank by April next year.

But according to UBS, this is too hawkish an assessment, writes WSJ. Instead, the major bank predicts a cut.

"We still expect the Fed's next interest rate decision to be a cut – albeit not until 2027," writes UBS CEO Ulrike Hoffmann-Burchardi in a comment.