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US Fed hawks circle around a March rate hike

Posted on: March 01, 2017

On a day where the focus was supposed to be on Trump’s State of the Union address to Congress, the US Fed stole the show by suggesting that a March rate hike is very much on the table. After having a probability around 30% last week, participants walked in this morning to see it sitting over 80%. Comments from San Francisco Fed President Williams were the main driver, who insisted that a March hike is receiving serious consideration.

Overnight, Trump’s speech was true to tradition. Light on policy details and heavy on rhetoric and big ideas for overhaul, it did sound considerably more presidential than in the past. This morning US data did nothing to reign in expectations, with Personal Income slightly better than expected while Spending was slightly lower than expected.

For those watching USDCAD, the train continues to push through resistance on the climb higher. The next levels of resistance to watch are the 1.3350/60 level and then around 1.3390 ahead of the figure. This morning we hear from the Bank of Canada, who could compound CAD weakness with a dovish statement. With positive economic signs in Canada recently, it will be interesting to see if Poloz is content to let general USD bullishness push CAD around, or if he goes for the jugular and talks the currency even lower. If the former occurs, look to reload around 1.3280 and again around 1.3210. If the later, strap on for a quick trip to 1.34 and beyond.

  • Yesterday’s NA Range 1.3188 – 1.3314
  • Asia Overnight Range 1.3285 – 1.3330
  • London Overnight Range 1.3308 – 1.3346

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