Dollar Climbs as Traders Seek Fed Guidance on Interest-Rate Path

Updated on
  • U.S. producer prices rise, signaling inflation pickup
  • Sterling falls to eight-week low as May gets Brexit go-ahead

Why the Fed Will Raise Rates Today

The dollar edged higher as traders mulled whether the Federal Open Market Committee will signal a quicker pace of monetary-policy tightening when it meets at a two-day gathering that ends Wednesday.

The Bloomberg dollar index rose 0.3 percent as investors speculated whether the central bank will provide hawkish guidance that could reignite the currency’s sputtering rally. Financial markets are focused on whether Chair Janet Yellen will signal a willingness to opt for four hikes this year, which would leave market participants to catch up.

  • U.S. producer prices rose more than forecast in February and costs increased from a year earlier by the most since March 2012, signaling inflation is picking up, a Labor Department report showed.
  • EUR/USD traded near fresh low 1.0605 with bids supporting at 1.0600, traders said. The pair slid earlier as traders repositioned and an algo program walked the currency lower, selling euros ahead of the ECB fix, traders in London said.
  • Cable fell as much as 0.9 percent, touching an eight-week low versus the dollar, but holding above 1.2100 support. Stops in pound longs were triggered below 1.2200; demand near current levels reflects a late morning sell-off in the EUR/GBP cross into and after the 11am fix, though EUR/GBP failed to escape what’s now a triple-top at 0.8783-87.
    • Sizable bids are seen closer to 1.2000 psychological level. Latest developments boosted implied volatility in pound crosses among all tenors.
  • USD/CAD rose to new high at 1.3495 in morning trading as crude dropped to session lows; crude/CAD correlation is at its highest level since August.