Why Dollar Bulls “Despair” As March Hike Looks Baked In

Bloomberg FX strategist, Vincent Cignarella, explains why for dollar bulls betting on a continued rise in the dollar, the lack of a strong move higher following last week’s repricing of March rate hike odds may be an ominous development.
Dollar Bulls Despair as March Fed Hike Looks Like It’s Baked In

Federal Reserve Chair Janet Yellen’s remarks Friday all but confirmed what traders rushed to price in last week: a rate hike mid-month is close to a lock.
The heightened confidence about March may actually spell trouble for dollar bulls in coming days — there’s little in the way of fresh incentives to buy more of the U. S. currency right away, after it surged to an almost six-week high last week. Fed speakers are now in a blackout period until their March 14-15 meeting, and for major economic data, traders have to wait for February jobs figures to be released March 10.
‘A further adjustment of the federal funds rate would likely be appropriate’ in March if employment and inflation continue to evolve as expected, Yellen said in the text of a speech Friday in Chicago. She also said the removal of accommodation is unlikely to be as slow as the past couple years, when the Fed hiked by a quarter-point in two consecutive Decembers.
But for market participants, that may not have been hawkish enough. After her remarks, futures indicate traders actually saw less of a chance that the Fed will achieve its projected pace of three hikes in 2017. The Bloomberg dollar index sank to the day’s lowest levels after her appearance. It dropped 0.7 percent, its worst day since January. It also stalled at its 55-day moving average, dropping back to a support level at its 100-day average.

This post was published at Zero Hedge on Mar 6, 2017.