#Fed# #Inflation# In 2001, a Morgan Stanley economist named Steven Jen coined the concept of the dollar smile. This model shows how the dollar behaves in different periods. According to the presented model, the dollar strengthens when the US economy is growing at a rapid pace (the Fed is tough and raises rates), as well as when the US economy is facing the threat of a recession. In between states where the US is growing slowly and the global economy is fine, the dollar is weakening.

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Investors' attention is focused on whether the Fed will stick to its hawkish course in fighting high inflation, or hold off on raising interest rates, given recent troubles among banks that have included bankruptcies and last-minute bailouts. Markets are now pricing the Fed's chance of not raising rates at about 15%, with a 25 basis point chance of a rate hike at about 85%, CME's FedWatch tool showed. Investor sentiment remained fragile as worries about the outlook for the banking sector began to ease after sharp market volatility in the past few weeks following high-profile US banking crashes earlier in the month and the bailout of lender Credit Suisse Group AG over the weekend. The Fed is facing a difficult choice given the strong labor market and inflation figures in February that were higher than many market watchers had expected. #FedInterestRateDecision#

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