Bets for May’s rate hike by the Fed underpins the US Dollar

US equities have turned read, while the greenback, as shown by the US Dollar Index (DXY), stages a comeback. The DXY sits at 102.214, gains 0.62%, and is one of the reasons for the GBP/USD pullback. Underpinned by traders bracing for additional tightening by the Fed, US Treasury bond yields are heading north, consequently bolstering the USD.

According to the CME FedWatch Tool, the probability of a 25 bps rate hike by the Fed stands at 84.7%, indicating an increase from last Friday’s 78%.

Earlier, a report by the New York Fed revealed that manufacturing activity in the region jumped, as shown by the Empire State Index, for March, advanced 10.8, above estimates of a -18 plunge. A rise in orders and shipments underpinned the data.

Given the backdrop, the GBP/USD retreated from daily highs at 1.2438 and extended its losses towards the S1 daily pivot at 1.2359, shy of last week’s low of 1.2344.

On the United Kingdom (UK) docket, Bank of England (BoE) Deputy Governor Jon Cunliffe crossed newswires. Cunliffe focused on digital currencies and said, “Systemic stablecoins will need to be backed with high quality and liquid assets,” and added that it would not be possible to protect stablecoin deposits in the case of failure.;