Dollar tightening, dollar strength

FOMC member James Bullard, a well-known hawk, opened the floor to a 75bps hike as the market rallied on expectations of further hawkish reaction by the Fed in their upcoming meetings. The dollar has gained against other G-10 currencies pushing the euro and pound to new lows once again.

This week doesn’t present market-moving data, however, ECB’s inflation print presents a channel for risk and volatility to flow through.

As the policy differential between the Fed and both the ECB & BoE widens this creates further problems for the eurodollar and cable respectively. Bets still lean toward a hawkish BoE in the upcoming meetings but the aggression is what remains in question as Andrew Bailey faces the possibility of double-digit inflation this year.