The dollar is certainly making a case for a further rebound this week after yesterday's gains. The hold at the end of last week here looks to be a pivotal one but I would argue it really comes down to Fed pricing now. And no, it's not about May but instead it is about what comes after.
We've already seen markets adjust from three rate cuts to two now before year-end and the question is, will there be a further repricing of the curve in Fed funds futures?
The banking turmoil helped to switch things around and markets suddenly stopped believing in the higher for longer narrative on Fed rates. But if that is to really be the prevailing theme this year, the dollar might actually be better off from hereon as a result - at least until markets reprice things again.
Even if the Fed makes a mistake in doing so and we head towards a deeper recession, is that something which hurts the dollar? There is a balance to be struck, as safety flows ain't all that bad for the greenback - particularly against the antipodeans.
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