The tension in the banking sector has led to a shift in the expectations of Federal Reserve interest rates. Markets have gone from pricing in a 100.0% increase in interest rates with no reduction this year to only a 17.0% increase with a 91.0% decrease this year.
This change caused a fall in the yield curve and pushed the price of the dollar down because the interest rate increase was out of the pricing.
However, the USD has been highly volatile due to risk sentiment flows and economic data
This creates a turbulent environment for the dollar at the moment, as the growing likelihood of recession and investment pressures should be a positive factor. But for now, if the Federal Reserve confirms in this week’s meeting that they will not raise interest rates again, this should be a negative factor for the US dollar.
On the eve of the Federal Reserve’s monetary policy decision on Wednesday this week, it is very complicated to know what the most likely reaction is from the US.
