The dollar is still sleeping on the Fed’s hawkish rhetoric?
monday 14 february
EUR: speech by the President of the ECB, Christine Lagarde
tuesday 15 february
JPY: Japan’s 4th quarter GDP, December industrial production
GBP: UK December Unemployment, January UI Claims
EUR: Eurozone GDP in the 4th quarter, expectations from the German ZEW survey for February
Wednesday February 16
CNH: China CPI and PPI in January
GBP: CPI and PPI for January in the United Kingdom
EUR: December industrial production in the euro zone
US Crude: EIA Crude Oil Inventory Report
CAD: Canada January CPI
USD: FOMC minutes, January retail sales and industrial production
Thursday February 17
AUD: unemployment in Australia in January
JPY: Japan’s foreign trade in January
EUR: ECB publishes economic bulletin, speech by ECB Chief Economist Philip Lane
USD: weekly jobless claims in the United States
USD: The Fed Speaks – Loretta Mester, Cleveland Fed Chair, James Bullard, St. Louis Fed Chair
Friday February 18
GBP: UK retail sales in January
EUR: consumer confidence in the euro zone in February
USD: The Fed is talking – Fed Governor Lael Brainard, Chicago Fed President Charles Evans
Inflation worries continue to linger around the world after last week’s searing US CPI print put even more pressure on the Fed to act aggressively to tame creeping pressures on the prices. Markets now anticipate more than six interest rate hikes by the Fed for this year and are very close to fully pricing in a 50 basis point hike by March. Although more centrist Fed officials have warned against moving too fast, one well-known hawk upped the ante by arguing that an emergency meeting may be needed to begin before .
An intra-meeting rate move is a rare event, although some analysts cite when the Fed hiked 100 basis points in 1979 from 11% to 12% in response to a disorderly 12% inflation. The current likelihood of a rate move over the next three weeks is now certainly not negligible, but it would come as a shock as many Fed members are more cautious about faster and larger rate moves.
Geopolitical tensions between Russia and the West may also have a say in the near-term direction of policy, especially if the war of words becomes even more aggressive.
Dollar baffled (so far) by potential Fed action
The greenback was relatively insensitive to the turmoil in the bond markets. Jerky swings were seen in the forex market immediately after historical US inflation data as traders were aware that the Fed is still buying assets as part of its bond buying program. But higher-than-expected, more rigid inflation and very tight labor markets point to an imminent Fed tightening. This should, all things being equal, provide a base of support for the dollar, at least against low-yielding currencies that have dovish central banks behind them. Buying safe-haven dollars could also be a feature if Ukrainian tensions escalate.
The February lows in the Dollar Index should provide some support, as well as the 100-day simple moving average and the long-term uptrend line.