Fed Rate Hike Odds Surpass 50% for the First Time This Cycle

Market expectations for a Federal Reserve rate hike have surpassed 50% for the first time this cycle, fueled by persistent inflation that pushed mortgage rates to a six-month high. Amidst this hawkish shift, markets are experiencing a rally, leading analysts to question if investors are ignoring significant geopolitical risks associated with news from Iran. David Rosenberg, founder of Rosenberg Research, warned that further rate hikes could worsen economic conditions and increase recession risks, supporting Jerome Powell's 'wait-and-see' approach. Rosenberg further noted that there is no concrete evidence yet of oil supply shocks feeding into broader inflation expectations. These emerging geopolitical tensions and economic warnings are now creating a counter-pressure to the hawkish sentiment that has supported the USD. Investors remain focused on whether the current market momentum can withstand these escalating external risks.