It's never a good idea to be short the US dollar on days that Fed Governor Christopher Waller is speaking. He's the voice of the hawks on the FOMC and he delivered again today, talking about raising rates and perhaps more than once.
That combined with a decent retail sales report and bank worries falling into the rearview mirror and there's the potential for more hikes. With more hikes, there's a growing likelihood of overdoing it as well and that could weigh on risk assets. In addition, US bank earnings today were strong.
Ultimately, it's looking like an easy decision for the Fed to hike 25 bps on May 3 now with little major data left to come. That's priced at 84% in Fed funds so it shouldn't come as a surprise. Beyond that what happens will depend on incoming economic data but the argument for a pause beyond that is compelling; though I wouldn't expect the FOMC to be explicit about it at the next meeting.
In any case, worries about higher rates and slower global growth are good for the US dollar and that's what we're seeing today. It's made for a reversal in what could have been a breakout in the US dollar yesterday.
The chart to watch is the euro:
The break above 1.10 yesterday was meaningful and it will be notable if it can hold it through the weekend, or not.
