Talking Points:
US Dollar continues to rise as markets undo half of post-FOMC drop
March rate forecast update, subsequent Fed-speak hint at new strategy
Comments from St. Louis Fed’s Bullard may add to case for June hike
The US Dollar outperformed in overnight trade, rising to its highest in four days against its major counterparts and erasing half of the decline sustained in the wake of last week’s Federal Reserve policy announcement. The rate-setting FOMC committee downgraded its projected rate hike path to imply two 25bps increases in 2016, down from four envisioned in December.
The greenback launched a recovery this week, with prices putting in the first three-day winning streak in a month. The move has played out against a backdrop of hawkish rhetoric from central bank officials, all of whom sounded a relatively upbeat tone on domestic prospects and cited external forces including the slowdown in China as the rationale for opting against a hike this month.
Tactically speaking, Janet Yellen and company may have realized that the gap between official and priced-in policy bets in December set the stage for subsequent risk aversion that undermined tightening in March. Lowering the outlook to match investors’ pre-“liftoff” view and talking up progress on the mandate while blaming outside headwinds may imply a new strategy aimed at realignment. This will presumably set the stage for a smoother hike in June.
The markets’ 2016 policy outlook implied in Fed Funds futures edged higher alongside the benchmark currency this week, hinting that the new approach is starting to have the desired effect. More of the same may be on tap today as scheduled remarks from St. Louis Fed President James Bullard – a voting member of this year’s FOMC contingent – cross the wires.
What are DailyFX analysts expecting from the US Dollar in 2016? Find out here!
Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
0:00
AUD
Skilled Vacancies (MoM) (FEB)
-0.9%
–
-0.4%
1:30
JPY
BOJ’s Funo Speaks in Kobe
–
–
–
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
8:00
CHF
KOF Institute Spring Economic Forecast
–
–
Low
9:00
EUR
Italian Hourly Wages (MoM) (FEB)
–
0.0%
Low
9:00
EUR
Italian Hourly Wages (YoY) (FEB)
–
0.7%
Low
10:00
CHF
Credit Suisse ZEW Survey Expectations (MAR)
–
-5.9
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EUR/USD
1.1080
1.1151
1.1184
1.1222
1.1255
1.1293
1.1364
GBP/USD
1.3852
1.4059
1.4133
1.4266
1.4340
1.4473
1.4680
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Source: Daily fx
