USD Rallies on March Fed Speculation amid a flurry of FOMC speakers
With President Trump’s speech to Congress done and traders waiting for budget details on his promises, focus has now turned to the upcoming FOMC meeting. This week has featured a flurry of Fed speakers ahead of the pre-meeting blackout which starts next Monday with the biggest names still to come.
Over the course of this week, a number of Fed members have been suggesting the potential for a March interest rate increase which would put the Fed on course for four rate hikes this year. Hawkish comments from NY Fed President Dudley really got the ball rolling yesterday. Today, the street has been responding to comments from Fed Governor Brainard last night. Dr. Brainard has long been one of the leaders of the dovish faction at the Fed and on several occasions in the past has been the one to dump cold water on rate hike speculation. Last night she suggested it would be appropriate to raise rates soon, and while she didn't call for a March hike, she didn’t reject the notion either.
Today, Fed Governor Powell, who doesn't speak very often, indicated in an interview that the case for a March increase has come together and it’s on the table for discussion. He also suggested that he still favours three hikes this year so one now could give the central bank more flexibility later.
There appears to be a shift in thinking at the Fed toward being more hawkish and being more proactive. Friday, speeches from Fed Chair Yellen and Vice Chair Fischer could impact rate hike speculation along with comments from other Fed members and next week’s US employment reports. The big interest rate decision is on Wednesday March 15th.
The USD rally has put a number of other currencies under pressure including the main Asia Pacific currencies; JPY, AUD, NZD, SGD along with gold and currencies elsewhere like EUR and CAD. Even a positive Canadian GDP report wasn’t enough to save the loonie from Uncle Sam’s steamroller.
US indices sold off late in the session after struggling through much of the day, sending the Dow back under 21,000 and the Russell 2000 back under 1,400. This suggests that traders may be starting to run out of patience with the political process and beginning to take some profits on Trump trades. This could send bearish momentum toward the start of today’s Asia Pacific trading. There are a number of reports due that could move markets today including Japanese employment and inflation figures and service PMI reports from around the world.
Costco $1.17 vs street $1.36
Significant announcements released overnight include:
Canada Dec GDP street 1.7%
Canada Q4 GDP 2.6% vs street 2.0% vs previous 3.5%
US jobless claims 243K vs street 245K
US natural gas 7 BCF vs street (3 BCF) and previous (89 BCF)
UK construction PMI 52.5 vs street 52.0
Eurozone consumer prices 2.0% as expected vs previous 1.8%
Eurozone producer prices 3.5% vs street 3.2% vs previous 1.6%
Eurozone unemployment rate 9.6% as expected
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
7:00 pm EST FOMC Mester speaking
10:30 am AEDT Japan unemployment rate street 3.0%
10:30 am AEDT Japan consumer prices street 0.4%
11:00 am AEDT NZ ANZ commodity prices previous (0.1%)
7:00 am GMT Germany retail sales street 0.7% vs previous (1.1%)
9:00 am GMT Italy GDP street 1.1%
10:00 am GMT Eurozone retail sales street 1.5% vs previous 1.1%
10:15 am EST FOMC Evans and Lacker panel
12:15 pm EST FOMC Powell speaking
12:30 pm EST FOMC Fischer speaking
1:00 pm EST FOMC Yellen speaking
Service PMI reports:
9:30 am AEDT Australia previous 54.5
11:30 am AEDT Japan previous 51.9
12:45 pm AEDT China Caixin previous 53.1
9:30 am GMT UK street 54.1
8:55 am GMT Germany street 54.4
8:50 am GMT France street 56.7
8:45 am GMT Italy street 52.8
8:15 am GMT Spain street 55.2
9:45 am EST US Markit street 54.0
10:00 am EST US ISM street 56.5