Market analyst Krishna Kumar says markets have largely priced in a 25 bps Fed
hike and dollar upside is limited unless the Fed signals a more hawkish stance.
The probability of a September hike has risen to 92%; markets even price three
hikes before next March, but much of the recent rise in tightening odds stems
from the oil-price spike. The Fed is likely to deliver the scheduled hike to
defend anti-inflation credibility, but may avoid explicit forward guidance and
is unlikely to validate markets' aggressive pricing of further hikes. Recent
remarks from Waller and Williams likewise suggest that, amid high oil-price
uncertainty, the Fed may be reluctant to commit to additional tightening.
Meanwhile, hawkish shifts at other major central banks could cap dollar gains.
