A sharp rebound for the US Dollar in February


The FX market had a quiet start to the week, with the Swedish krona and pound being the best performers yesterday. However, for the month as a whole, the US dollar has shown strength, staging a strong rebound after a significant sell-off between September and February. The dollar index (DXY) has reversed over a quarter of the losses sustained during that period and is currently trading at levels seen in December.

The main reason for the US dollar’s rebound is the hawkish repricing of rate hike expectations by the Fed in response to stronger US activity and inflation data at the beginning of the year. The latest PCE deflator report has prompted the US rate market to fully price in 75bps of further hikes, with a higher probability (~62%) that the Fed could even revert back to…

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