With investors already pricing more than one 25bp hike from the Fed at the March 16th FOMC meeting, it is hard to see that pricing moving too much further ahead of the Fed's meeting next Wednesday. For today, the US data calendar looks quiet and again the market should remain focused on 4Q US earnings, whether Treasury yields push any further ahead and developments in Ukraine. For today, DXY could drift in a 95.25-95.75 range.
The CAD continues to perform well with the USD/CAD trading back below 1.25, reflecting a generally softer USD and crude continuing to reach new highs. Recent data trends have reflected better than expected growth and employment into Q4 suggesting that the economy is operating closer to full capacity. In the short term, expect the USD/CAD to possibly test 1.2450.
EUR/USD is drifting in tight ranges and may continue to do so today. For the Eurozone, the highlight will be the release of the December ECB minutes - the meeting at which the ECB outlined plans to wind down asset purchases. Typically, these minutes do not prove too controversial and look unlikely to make any case for the ECB to be in a hurry to raise rates. Analysts continue to suggest that 1.1375/85 resistance can hold EUR/USD intra-day.
Unsurprisingly political risk has not damaged GBP, where the focus remains squarely on whether the BoE hikes 25bp on February 3rd. The market tried to dissect yesterday's testimony from Governor Bailey - especially on the issue of Quantitative Tightening but the currency has not moved much. We continue to favour the GBP/USD drifting back toward drifting back to 1.3670 in the short term.
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