The odds of a December rate hike in the US increased to over 90% yesterday, leading the US dollar to surge to a 13-year high against major currencies and a renewed sell-off in Treasuries.
Minutes from the Fed's November meeting said it would be appropriate to raise rates "relatively soon" reinforcing the case for a rate hike next month.
A tool created by CME Group named FedWatch started to predict a 100.2% chance of a December increase in rates, but this was soon to be found as a glitch and odds were corrected to 93.5%, with a 0.25bp rise expected.
As a result of the hawkish tone of the Federal Open Market Committee, the US dollar surged to its highest level since March 2003. Reuters reported the dollar index rose 0.6% to 101.67, after earlier soaring to an almost 14-year peak of 101.90.
It has climbed more than 3% since Donald Trump's victory in the US elections a fortnight ago.
US Treasuries began to plummet with 10-year yields climbing as much as 10bps to over 2.4% in early trading, but the debt managed to claw back some of its losses, and yields ended 4bp higher at 2.35% on the day.
During the week of the elections, bond markets across the world wiped $1trn off their market value as investors expected a boost to inflation.
Menawhile, the dollar strength also meant gold fell below $1,200/oz for the first time since February, with investors selling out of exchange-traded funds backed by the metal.
The price of the precious metal has dropped over 7% since the election of Trump, which sent the dollar soaring on hopes he would boost growth through infrastructure spending and tax cuts.
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