Dollar Trades Strong as Fed Split on 50bps Rate Increase

Dollar Trades Strong as Fed Split on 50bps Rate Increase

The US dollar was stronger against its major trading partners today, as a light, Monday schedule puts the focus on the release of retail sales, industrial production and the Federal Open Market Committee minutes due to being released Wednesday.

Data on home construction will be released Thursday and existing home sales will be released Friday before the long holiday weekend.

Federal Reserve officials were split last week on the possibility of a 50 basis points (bps) rate increase at the March 15-16 meeting after consumer price growth was stronger than expected in January.

Minutes of the previous FOMC meeting to be released Wednesday should detail the early discussions regarding these plans.

St. Louis Federal Reserve Bank President James Bullard, who said last week he would like to see 100 basis points of tightening by July, will be interviewed on CNBC on Monday.

Bullard is one of the more hawkish members of the FOMC, but his comments took the markets by surprise nonetheless and any agreement from other officials this week will solidify the market concerns of a fast liftoff for rates.

A quick summary of foreign exchange activity heading into Monday shows that GBP-USD fell to 1.3511 from 1.3560 at the Friday US close and was virtually unchanged from 1.3513 at the same point a week ago. There are no UK data scheduled for release Monday.

UK unemployment will be released Tuesday, followed by inflation on Wednesday and retail sales Friday. Market expectations are for another rate increase at the next Bank of England meeting in March, with possible sales of bond holdings to follow sooner than expected.

EUR-USD fell to 1.1307 from 1.1348 at the Friday US close and was well below the 1.1445 level a week ago due to the impact of the US consumer price index and efforts by European Central Bank officials to tamp down speculation of a near-term rate increase.

The highlight of the EU’s data schedule will be the gross domestic product growth release Tuesday. Read: Dollar Steadies Ahead of Inflation Data, Fed Officials Speak

USD-JPY fell slightly to 115.3626 from 115.4959 at the Friday US close but remained well above the 114.5983 level a week earlier as markets upgraded their expectations of a rate increase on the strong US CPI report and comments from Fed officials, particularly Bullard, that the FOMC could raise rates faster than previously expected.

There were no Japanese data released overnight, so the next key data events on the schedule are GDP on Tuesday and consumer prices Friday. USD-CAD rose to 1.2751 from 1.2736 at the Friday US close and 1.2724 at the same point a week ago. There are no Canadian data scheduled for release on Monday.

The trucker strike over vaccine requirements appears to be ending, but it will take some time for auto production to return to normal levels. Other strikes are possible in the US in the coming weeks. Canadian consumer prices will be released Wednesday, followed by retail sales Friday. #Dollar Trades Strong as Fed Split on 50bps Rate Increase

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