DXY inter-markets: Yellen has the last word

The US Dollar Index, which gauges the buck vs. a basket of trade-weighed rivals, keeps the upside well and sound for yet another day, recording its fifth consecutive session with gains and already navigating in fresh 7-week tops above the critical 102.00 barrier.

USD remains well supported by rising expectations of a Fed’s rate hike in a couple of weeks. In fact, according to Reuters, the probability of a 25 bp rate hike on March 15 is at just above 74% based on Fed Funds futures prices.

Increasing bets on higher rates as soon as later this month have echoed on US yields, which have accelerated the rebound from recent lows and are already trading in multi-day tops. The 10-year reference is once again flirting with the key 2.5% level after briefly testing 2.31% on February 24.

In the same line, auspicious results from the US docket as of late have also added to the case of a strong Dollar.

However, the onset of this renewed and strong up move in the buck needs to be found among Fed speakers. Recent comments by FOMC permanent voter L.Brainard said that a gradual path of rate hikes could be appropriate ‘soon’, while her New York Fed peer W.Dudley argued that a case for further tightening has become ‘compelling’. Those comments fall in line with previous hawkish appreciations by Bosto Fed E.Rosengren, Dallas Fed R.Kaplan and Philly Fed. P.Harker.

All in all, Chief Janet Yellen is due to speak on ‘Economic Outlook’ tomorrow and the buck could get yet another push from the very boss in case, as it is expected, she keeps her recent tone unchanged, emphasizing – among other issues - the robust health of the US labour market and the likeliness that inflation could reach the Fed’s target in the medium term.