Fed Trapped in Hawkish Corner, US Dollar Soars

The US dollar has gained strength as investors anticipate a rate hike from the Federal Reserve. The Fed's chairman, Kevin Warsh, has made it clear that he will not be swayed by recent inflation data, which showed only a modest increase in core inflation.

This decision has trapped the Fed in a 'hawkish corner,' where any move to raise rates would provoke fierce opposition from Donald Trump. Conversely, keeping rates at their current level could undermine confidence in the Fed and damage Warsh's credibility.

The derivatives market now suggests that a federal funds rate hike is a foregone conclusion, with investors expecting several rate hikes to bring inflation under control.