Dollar’s Rally at Risk of Reversal If Fed Sets Lower-Than-Expected Rate Outlook
- Most traders see Fed funds rate peaking near 4.5% in March
- Fed’s US growth forecast may also add to dollar volatility
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The US dollar’s rally is at risk of a reversal if the Federal Reserve sets its interest-rate outlook at a lower level than traders are betting on.
Market-implied expectations for the so-called dot plot jumped this month, with some betting the peak will be around 5%, if not higher. Markets are pricing a peak at 4.5% by March and an end-2023 rate of 4% to 4.25%. In contrast, the most recent forecasts by Fed officials in June are almost all below 4% for 2022-2024.