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USD Rallies as Fed Emphasizes Hike Potential, Pound Still Outruns

USD Rallies as Fed Emphasizes Hike Potential, Pound Still Outruns

John Kicklighter, Chief Strategist

Talking Points:

  • The Fed made a clear effort to emphasize its readiness to hike rates as soon as June and market skepticism slipped
  • While the Dollar move was significant, the Pound's surge was the day's most impressive move amongst the majors
  • As FX volatility rises, the G-7 meeting looks to focus the market's more systemic concerns

See how retail traders are positioning in the majors using the FXCM SSI readings on DailyFX's sentiment page.

The FX market continues to absorb the bulk of the financial system's volatility. With fundamental encouragement, the Dollar and Pound proved this past session's most aggressive movers. Both currencies rallied, but their motivation wasn't the same.

For the Greenback, the FOMC minutes crossed the wires with language that focused the market's view on the debate over a June rate hike. While the central bank did not say it was committing to a move at that meeting, their emphasis on the probabilities made it clear that the Fed is far more willing than what the market is accounting for. On that intensity, the market's deep skepticism started to crack. If the market evolves to see a hike as even an even chance, the Dollar has much more to rally - and equities (risk trends in general) have far further to fall.

For the Pound, the move was more severe, even though the catalyst was far less convincing. The UK jobs data was mixed, but the technical progress was profound. Ahead, there is more event risk to work with; but the G-7 meeting as well as the development of speculative trends and fundamental themes is of primary concern. We discuss that in today's Trading Video.

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