US Rate Cut Chance in March Falls to 65%

The US Dollar Index reached a new 1-month high yesterday, as the market starts to see a lower chance of the Fed making a rate cut at its March meeting.

1. Over the past day, the US Dollar Index advanced firmly to again reach a new 1-month high following a period of consolidation. The Dollar is making these same medium-term highs in the AUD/USD and NZD/USD currency pairs as well as in the EUR/USD which has now seen the end of its long-term bullish trend. This Dollar rise is accompanied by a rise in US treasury yields, as market participant reassess the chance of a rate hike by the Fed in March. The CME’s FedWatch tool has fallen from 80% expecting this cut last Friday to 65% now. This belief got a tailwind from recent comments by FOMC Member Waller who said “I see no reason to move as quickly or rapidly as in the past” concerning potential rate cuts.
2. Most stock markets have moved lower over the past day, especially in Asia, led lower by poor Chinese GDP and retail sales data released a few hours ago.
3. In the Forex market, the US Dollar has been the strongest major currency since the Tokyo open today. The Australian Dollar and the Japanese Yen have been the weakest, putting the AUD/USD and USD/JPY currency pairs into focus.
4. Gold has fallen quite strongly over the past day, and is close to making a bearish breakdown below the $2000 area which has tended to act as support.
5. There was a release earlier today of UK CPI (inflation) data which showed that instead of falling from 3.9% to 3.8% as expected, annualized inflation has risen to 4.0%.
6. Canadian CPI (inflation) data released yesterday showed a monthly contraction of 0.3%, as was widely expected.
7. Cocoa futures reached a new multi-year high price last Friday, which will keep trend traders interested in this commodity on the long side. It has been exhibiting a powerful bullish trend for more than a year now.
8. There will be releases today of the following potentially high-impact economic data:
   • US Retail Sales
   • Australian Unemployment