The US dollar just posted its biggest gain in three months, driven by Federal Reserve officials signaling support for interest-rate hikes this year.
A stronger dollar, fueled by higher rate expectations, acts like a vacuum on global liquidity. It pulls capital toward US-denominated assets and away from just about everything else, including crypto. The timing matters because markets had been gradually pricing in rate cuts, not increases.
What happened and why it matters
Federal Reserve officials publicly indicated their support for raising interest rates further, catching a market that had grown comfortable with the idea of easing. The dollar surged in response, reaching levels not seen in months.
Fed fund futures, which reflect where traders expect rates to land, have undergone a significant adjustment. Markets had been pricing in potential rate cuts. Now, those same instruments show a nearly 50/50 chance of a rate hike in December and roughly 60% probability of one in January.
