“Buy the rumor, sell the fact response coming from the Fed”?

 

‘USD weakness coming?’

50 bps hike expected and QT start

The Federal Reserve meets at the start of May and they have widely signaled a 50 bps rate hike and the start of Quantitative Tightening. This is why we might see a ‘buy the rumor, sell the fact response’. The Federal Reserve has been forced into action by surging inflation with Short Term Interest Rate markets pricing in nearly 9 interest rate hikes this year. Headline inflation in the US is now over 8% and the Fed is hoping that they can hike interest rates without slowing growth. 

USD: Peak Bullishness

It is hard to see how the Fed could be even more bullish than they already are. The USD must be close to peak bullishness now and remember that in recent history the USD can lose value after the first rate hike from the Fed. Look at the historical reaction of the USD in previous hiking cycles. In the 6 months after the first rate hike the USD tend to lose value. SO, this is even more reason we may see a ‘sell the fact’ response.