A lot happened through Federal funds future market since last hike in December. Initially market was pricing a hike two hikes for the year and from there went to no hikes, with increasing possibility of a rate cut and now it is predicting possibility of a hike in September.

In contrast to market expectation, we expect FED to hike in second quarter, most likely in June, provided current market conditions prevail. Inflation have started showing its face in US and other parts of developed world. Fed's vice chair Fischer has indicated in same line and welcomed the development in inflation.

Let's look at market pricing of hike in probabilistic terms.

• March, 2016 meeting - Market is attaching 100% probability that rates will remain at 0.25-0.5%,
   
• April, 2016 meeting - Market is attaching 86% probability that rates will remain at 0.25-0.5%, and only 14% probability that rates will be at 0.5-0.75%
   
• June, 2016 meeting - Market is attaching 64% probability that rates will remain at 0.25-0.5%, 33% probability that rates will be at 0.5-0.75% and only 3% probability that rates will be at 0.75 -1%.
   
• July, 2016 meeting - Market is attaching 61% probability that rates will remain at 0.25-0.5%, 34% probability that rates will be at 0.5-0.75% and only 5% probability that rates will be at 0.75-1%
   
• September, 2016 meeting - Market is attaching 50% probability that rates will remain at 0.25-0.5%, 39% probability that rates will be at 0.5-0.75%, 10% probability that the rates will be at 0.75-1% and only 1% probability that the rates will be at 1-1.25%.

We expect soon enough for market to start pricing a hike in July and slowly shift expectations for June, which might provide some support to Dollar.

Dollar index is currently trading at 97.33, up 0.13% today so far.