Daily Market Update

Although Fed Hike Chances Jumped, U.S. Dollar Fell

March 03, 2017



The U.S. Dollar is trending downward against most counterparts following data releases that provided positive momentum in certain regions. Japan finally got a taste of inflation, the Euro-zone met its expected rise in Purchasing Managers Index for the services sector, and Britain may be headed for a slowdown as an official Brexit process nears. The Bloomberg Dollar Spot Index has risen by 1.0% thus far. We shall see if PMI Services and ISM non-manufacturing gauges improve the dollar’s prospects as they’re expected to expand as much as last month.

Currently, chances of a rate increase by the Fed on March 15th are at 90.0%. Later today, we’ll monitor Janet Yellen’s speech at the Executives Club in Chicago to see if she propels chances to a basic guarantee of a hike.



The Pound is weaker this morning after underwhelming data that may signal a slowdown ahead of the official separation from the EU. PMI Services fell far more than expected to 53.3 under the expected 54.5 reading.
The services sector is one of the main drivers of the UK economy and the reduction in what companies are investing on to upscale production as well as hiring is worrisome. The low PMI implies a level of economic growth of just 0.4%, which would represent the slowest pace in a year. The Pound is 3.4% down from the end of January.



The Euro picked up steam, recovering from hitting its worst level in two months yesterday afternoon. Politics are simply overshadowing the economic advances the Euro-bloc is experiencing. A slew of data showed that that PMI and other indicators are meeting expectations, if only slightly lower than estimates, which signifies that the tools used by the European Central Bank have worked. Nevertheless, any gains the Euro could see as a result of progress will be subdued.

While Italy is stagnant, France is wondering if Le Pen will win, and Germany has dwindling Retail Sales, countries on the periphery in particular Spain are improving their situations. EUR has erased half of its weekly losses thus far this morning.

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