Societe Generale FX Strategy Research notes that despite yesterday’s Fed’s bullish message, the market’s confidence in a June hike and pricing of a second one by December has moved very little and the priced-in probability is only 54.4%.
“For the dollar, it’s the longer-term rate outlook which matters and that hasn’t moved. The dollar’s been tracking the move in forward rates closely enough but as the global economy improves and the rate outlook elsewhere changes, the DXY index has been making a series of lower highs and lower lows,” SocGen argues.
As such, SocGen still holds the view the USD has likely peaked and the little bounce we saw post-FOMC doesn’t alter that picture at all until DXY breaks 101.50.
Source: Societe Generale Cross Asset Research
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