US dollar to consolidate gains

Markets last week were spooked by comments from Fed Chairman Yellen and the upward drift in Fed Funds projections which appeared to indicate a rate hike would take place around the spring of 2015.

This week will give the chance for Fed officials to either downplay or reinforce Yellen’s comments. There are several Fed speakers on tap over coming days including Stein, Lockhart, Plosser, Bullard, Pianalto and Evans.

Despite Yellen’s comments US equity markets ended the week higher despite Russia’s annexation of Crimea. US bonds yields also firmed over the week while the USD rebounded.

Sentiment this week will depend in part on further Fed commentary as noted above, Chinese data and also whether tensions between the West and Russia intensify. Reports that Russia has built up a “very sizeable” force on its borders with Ukraine do not bode well in this respect.

US data this week will look less weather impacted and will err on the positive side. Consumer confidence is set to be unchanged in March, while February new home sales are set to decline but durable goods orders are set to rise. Q4 GDP is likely to be revised higher and personal income and spending will reveal healthy gains in February.

Overall, the USD is expected to consolidate its recent gains will some improvements on the data front will interest rate markets will remain under pressure.

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