The market is nibbling away at pricing for H2 Fed rate cuts and Dollar shorts are feeling the squeeze. It is “just a correction” but it is painful all the same, according to Kit Juckes, Chief Global FX Strategist at Société Générale.

Dollar and end-year Fed expectations edging higher together

“As the regional banking crisis erupted, the market briefly priced end-year rates below 4% but that’s back above 4 ½% now and the Dollar is grinding higher in the process. I doubt we can get back to where we were in early March, but the market’s short Dollars and this kind of grinding uptrend can be painful.”

“As for EUR/USD, the long-term rate trends suggest that there’s still considerable upside potential. The current correction is just that, even if it does last several more weeks and cause further pain.”