Forex Blog: Currency Trading News & Analysis.

March 24th 2006

USD buoyed by prospect of rate hikes

Next Tuesday, America’s Federal Reserve Bank will likely raise its benchmark federal funds rate by 25 basis points to 4.75%. When the Fed embarked on its current cycle of monetary tightening, most economists predicted it would stop raising rates at this level. Now, supported by a recent spate of hawkish economic data, analysts have revised their models to take into account an additional 25 basis point hike. In fact, interest rate futures currently reflect a net 76% probability that such a rate hike will take place at the Fed’s next meeting in April. This should come as great news to USD bulls, as the dollar’s day of reckoning has surely been postponed by many months, at the very least. The Financial Times reports:

The bulk of the economic numbers that did emerge largely played into the hands of the rate hawks, with core producer price inflation exceeding expectations and strong existing home sales data attesting to the continued robustness of the housing sector.

Read More: Dollar bounces as rate expectations rise

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