Here's a look at the changes in the Fed funds futures curve over the last one week and compared to a month ago:

fed funds

After the US jobs report on Friday last week, traders moved in to further price a higher for longer narrative by the Fed and that hasn't changed by much even after yesterday's weekly jobless claims data.

And when you compare to a month ago when traders were pricing in three rate cuts by year-end, it's been a dramatic shift in the outlook as the Fed succeeded in getting their message through.

It all comes down to what the next message will be from Powell & co. as they make their decision next week. If they keep rates unchanged i.e. pause, I would expect it to be a hawkish one (or at least an attempt to be) as they are likely to talk up chances that they could only be "skipping" a meeting before raising rates again.

However, we know how easily markets can waver and all it will take is just one misworded communication and the dovish floodgates will open.

But if the Fed does decide to raise rates by another 25 bps, that will certainly mean more pain for risk assets and there will be significant repricing across broader markets. In turn, expect that to spur a strong rally in the dollar unless the Fed explicitly says that this would be their final rate hike and that they will pause to reassess moving forward.