FxWirePro: Dollar continues to firm; rate cut odds rise

Long U.S. dollar seems to be the 'bet' for 2019 in the currency market,

• The dollar index, which is the value of the U.S. dollar against a basket of six currencies is continuing to march higher in 2019. The index is up 2.2 percent YTD, and in last one month, the index is up 1.6 percent.
• While USD firms, its major trading counterparts have declined against it; EUR (-2.75 percent YTD), GBP (-2.4 percent in last one month), CHF (-3.75 percent YTD), and JPY (-2 percent YTD).

While the recent rise in demand for U.S. Treasuries is playing a key role in USD’s strength, the hike odds are not having much of an impact.

While USD firms, investors are increasingly betting on the possibility of a rate cut by the U.S. Federal Reserve. As of today, the financial market participants pricing a 60.5 percent probability of a rate cut by the Fed before the end of 2019, compared to just 40.6 percent a week ago.

However, an increase in rate cut odds shouldn't be viewed as a catalyst that would push the dollar down, since other central banks may outcut the Federal Reserve.