Powell channels Volcker, yen intervention & sterling breaks

Another eventful week in financial markets has seen the US dollar strengthen across the board as the FOMC’s 75bp hike and Chair Powell’s hawkish message hammered risk sentiment. The dollar is now near, or through, many of our (previously dollar-bullish) end-year forecasts, and the speed of its surge over the past few weeks suggests a pause is due before long. But with volatility in currency and bond markets reaching extreme levels, the probability of a wider risk-off crescendo in which the dollar rises much further is increasing.