The dollar is moving sharply higher on foreign exchange markets. Changing monetary policy expectations and geopolitical tumult are ripping up expectations from earlier this year of the dollar easing amid a softening US economy and accommodation from the Federal Reserve. The latest sticky US inflation data, coupled with continued robust activity and turmoil in the Middle East, has sparked surging dollar demand (Figure 1). The market has gone from pricing six Fed rate cuts this year to well under the three projected in the latest Fed dot plot. If inflation is coming down in a bumpy manner and real activity is holding ... (full story)