Forex today: US dollar and U.S. rates higher on Fed expectations

Ross J Burland FXStreet

Once again the market was driven by prospects of a Fed hike this month. The date is fast approaching, 15th March, and the next set of data this week to watch out for in the main will be the nonfarm payrolls on Friday. Should this data live up to expectations, then this could well seal a deal for the next FOMC meeting.

As a result of the optimism and renewed confidence in the Fed, the US dollar and US rates have been edging higher on a daily basis and today was no exception. The US 10yr treasury yields climbed higher again today from 2.49% to 2.51%, an important milestone that opens prospects for higher still towards this year's highs at 2.61%. On the back of this, the US dollar index is 0.2% higher before the close at the time of writing. Gold also dropped to a 4-week low. Continuing to monitor the April Fed fund futures, this has now risen to 0.87%; this implies a 100% chance of a rate hike in March.

Data was limited in the US session with just the US trade balance for January that came in line with expectations of -USD48.5bn and at a five-year low. The US dollar strength could continue to damage US exports along the way and is something that could become a concern in markets in the medium term and weigh on the greenback going forward.

Meanwhile, there were a number of European political headlines crossing the wires, supporting the euro but weighing on the pound. As we head towards the Dutch and French elections, this will be sure to be a key driver, especially as the market prices the Fed in fully and looks to alternative catalysts to keep the all of us in business.

Despite the political positives, with the ECB coming up this week, the euro dropped 42 pips from the 1.06 handle. The yield differentials were driving USD/JPY higher from 113.74 to 114.15 and the pound below the 1.22 handle to a low of 1.2168. The antipodeans were under performers with the Aussie giving up post RBA gains on the 0.76 handle. AUD/USD was falling back to 0.7574 the low. The Kiwi also fell to a new two-month low at 0.6954 weighed by further drops in global milk prices of 12.4%. This has been the main driver of the divergence between the antipodeans in the cross. AUD/NZD is better-bid to a ten-month high at 1.0910 after the expected GTD price index falling by 6.3%. However, this had been telegraphed by futures and came as no surprise. The GDT WMP has now fallen by 23% YTD.

Day ahead

China is the focus in Asia with the trade balance while the ADP report in the US session could be earmarked as a prelude to the nonfarm payrolls showdown on Friday - Another positive report is expected with a gain of 180k.

GMT	Event	Consensus	Previous
Tuesday, Mar 07
21:00	KRW FX Reserves		374.04B
21:30	USD API Weekly Crude Oil Stock		2.5M
21:45	NZD Manufacturing sales		2.1%
23:50	JPY Bank lending (YoY)		2.5%
23:50	JPY Gross Domestic Product (QoQ)	0.4%	0.2%
23:50	JPY Gross Domestic Product Deflator (YoY)		-0.1%
23:50	JPY Gross Domestic Product Annualized	1.6%	1.0%
23:50	JPY Trade Balance - BOP Basis		¥806.8B
23:50	JPY Current Account n.s.a.	¥239.0B	¥1,112.2B
Wednesday, Mar 08
24h	RUB Women's Day
02:00	CNY Imports (YoY)	20.0%	16.7%
02:00	CNY Trade Balance CNY		354.5B
02:00	CNY Exports (YoY) CNY		15.9%
02:00	CNY Imports (YoY) CNY		25.2%
02:00	CNY Trade Balance USD	$25.75B	$51.40B
02:00	CNY Exports (YoY)	12.3%	7.9%
02:00	CNY FDI - Foreign Direct Investment (YTD) (YoY)		-9.2%
05:00	JPY Coincident Index		114.8
05:00	JPY Leading Economic Index		104.8

Main topics in U.S. session

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.