The Greenback staged an impressive rebound on Tuesday following hawkish comments from a U.S. Federal Reserve official, which reinforced expectations of a U.S. interest rate hike in March. WTI crude oil was exposed to further losses on Wednesday after the shocking increase in U.S fuel inventories and decline in Chinese demand revived concerns of the excessive oversupply in the global markets.
Market participants will be focused on specific wording from the FOMC as it relates to inflation prospects, rate hike calendar, and the expectations of wage growth. Currency traders will continue to watch the most recent U.S. dollar volatility closely as global politics impact global currency pairs.
In defiance of traditional market correlations, U.S. stocks, commodities and the US dollar all rallied in sync through November and December, leading some traders to conclude that the usual intermarket relationships had been repealed. We were always skeptical of that notion, and based on today's comments, it's becoming increasingly clear which "leg" of the bullish "Trump Trade" is most vulnerable: the dollar.