USD Rate Expectations

The US dollar has outperformed all other major currency pairs recently. The recent strength of the US Dollar can be attributed in part to concerns surrounding the Federal Reserve (Fed).

The Fed has consistently shown caution against prematurely signalling a permanent pause in the current cycle of interest rate hikes. However, market sentiment appears to differ, with market-implied probabilities indicating a near 100% likelihood of a rate pause in September. The outlook for November remains more uncertain, with a more evenly divided sentiment regarding the Fed's next moves.

Data out of the States last week was largely positive, business orders were strong, and prices paid for goods up, adding to inflationary pressures and higher energy costs continue to be a factor. USDCAD is also currently trading at a year high, after the Canadian central bank held interest rates last week at 5%.

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