USD sell-off gathers significant momentum as Fed rate hike expectations fade

Thursday’s session was a continuation of the USD sell off which has gathered significant momentum as expectations of a Fed rate this year fade. The market probability is less than 50% for one 25bp move this year, and having priced in four at the start of January, this shift has caused the USD index to fall from 99.63 to 96.26 in this week alone. Losses in USD/JPY stopped shy of 117.00 in North American trade Wednesday, but after a brief recovery, we returned through the figure, but stalled ahead of 116.50. EUR/USD gains have been just as strong, following the 1.1000 breach with strong gains into the mid 1.1200’s, though as in most cases, some consolidation in play now. CAD is the exception, holding close to the 1.3635 highs against the USD as WTI has pushed through $33.0. A big day for GBP, with the BoE vote split moving back to 9-0 for unchanged rates. This was tempered by governor Carney reiterating the next rate move is up, and after a brief hit down to the low 1.4500’s, Cable returned to post fresh recent highs to 1.4668/70. EUR/GBP broke up to .7700, but was quickly knocked back. Pre China New Year gains in the CNH saw the spread over CNY wiped out – both rates below 6.5700. In EM, strong gains in BRL, but Oil related pairs lagging.