It should come as little surprise that the dollar is surging, as the market-implied probability of four rate hikes this year is now comfortably above 50%.
The real question for markets is how high that contingent probability (derived by multiplying the probabilities of a hike in each quarter) can get. Given that one hike is already in the tin and June seems like a done deal, what we're really pricing is chances that the Fed goes in both September and December.
A 75% chance in each month yields a contingent probability of 56.25% (0.75 * 0.75), more or less where we are now.
Source: Bloomberg Pro Terminal
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