U.S. Dollar Climbing as Fed Hike Chances Closer to 100%

USD

The U.S. Dollar remains on the rise following further endorsement from a Fed voting member who sees it appropriate to hike rates at the March 15th meeting. The economy is improving at a desired pace, unemployment figures are consistent, and inflation is steadily growing. The chances of a rate increment are now at 88.0%. As a result, the Bloomberg Dollar Spot Index is at its best level since mid-January.

Stocks are also on the up and up fueled by optimism from the new administration after President Trump’s conciliatory tone on Tuesday night and deregulation that could propel more business activity, particularly in the financial sector and pharmaceuticals. We see the greenback keeping in track with these trends in the short-term. Jobless Claims this morning came in better than expected and were revised downward for the previous reading.

 

EUR

The Euro fell despite meeting expectations in terms of fundamental economic data, but any potential gains from good performance were negated by the scandal in the French elections. Candidate Francois Fillon is now under investigation for graft and corruption, including his wife. The probe could not come at a more inopportune time when markets are holding hope that Marine Le Pen does not succeed. Her victory would mean a push to separate France from the European Union.

We predict a very close race moving forward and downward pressure on the Euro. Unfortunately for the shared currency, politics are overshadowing recoveries in Spain and a path towards inflation. Euro-zone’s unemployment remained at 9.6%.

 

JPY

The Yen is down to its weakest level since the end of January based on renewed risk-appetite across global markets and an underwhelming auction of 10-year Japanese treasury bonds. JPY is down 2.3% thus far this week. We expect the Yen to move with the flow of markets, appreciating as soon as things start looking dire.