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it is clear that with the market pricing in 100% chance of tightening, investors are treading carefully. The dollar did not extend Friday's losses versus the Japanese Yen but it traded lower against sterling, Swiss Franc and the commodity currencies. What's interesting about this pullback is that it comes amidst a persistent rise in U.S. rates.
U.S. rate hike in March to pricing one in almost completely. According to Fed fund futures, the odds of a rate hike this month sits at 90%, up significantly from 40% the week prior. Sentiment could also swing the other way if next week's non-farm payrolls report is abysmal or between now and March 15th, stocks crash. Of course both of these scenarios are unlikely because while market expectations have changed recently, underlying fundamentals have not.
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