An increase in short-term interest rates is traditionally viewed as bullish for the dollar. Yet, take a look at FOMC rate hikes over the past year. Each was followed by a strong decline in the dollar index (DXY.) When the FOMC declined to raise rates, on the other hand, DXY usually rallied — at least temporarily.
The FOMC made no secret of their plans to raise the discount rate. So, naturally, we can surmise that front-running played an important role in the price action. But, does it explain the continuing slump that, so far, has nailed each of our downside targets without fail?
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