Forex today: even more upside in the dollar and yields

The theme yet again was a strong dollar, rising yields and on the back of yet, further hawkish Fed speak while markets price in a Fed hike as soon as this month. The US dollar index is 0.4% higher on the day while interest rates in the US 10yr treasury yields climbed from 2.45% to 2.50% and shorter term 2yr yields jumped from 1.28% to 1.33%. 

We have had a number of Fed speakers in recent sessions and all of whom are advocating for Fed hikes, as many as three in 2017 and implying as soon as March for lift off following December 2016's rate rise of 25bps. Today market's demand for the greenback came as Brainard's and Powell's comments complimented that of Dudley's and Williams recent hawkish comments and that has pushed the Fed fund futures yields even higher by 2bp and increases the likelihood of a Fed hike this month by a further 10% to a 90% chance.

From the FX space, with a further dollar, the antipodeans took the brunt of it with both crosses losing around a cent to the greenback and printing fresh lows below key technical levels. The yen moved 55 pips higher to score a high of 114.60 while the euro lost a similar amount fo pips to a low of 1.0494. Sterling was making fresh six-week lows at 1.2240.

On the data front, US jobless claims arrived at 223k (vs 245k expected) and came in as a 44-year low which could aid nonfarm payrolls next month and hence the dollar performed well on this data. For the day ahead, the focus will be China's services and a speech from Dr John McDermott, Assistant Governor and Head of Economics at the Reserve Bank of New Zealand. Further ahead to close the week down, Fed Chair Yellen will be making a speech in Chicago to round-off all the Fed speakers of late. 

Main topics in U.S. session

• NZD/USD: fundamentals don't tally with technicals
• GBP/USD: sell minor rallies - Scotiabank
• AUD/USD intermarket: DXY and lower commodities to weigh on Aussie?
• US dollar strength could play catch up with widening yield spreads - BTMU
• Brexit: Despite defeat, May set to trigger Article 50 before end of March - Danske Bank
• Canada: GDP growth in Q4 expected at 1.8% q/q annualized – RBC CM
• UK PM spokesman: PM has been clear that the "Brexit Bill" should be passed without amendment