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Dollar Bulls Reclaim The Whip Hand

The US dollar's consolidative phase appears to have ended with the January employment report. Employment growth accelerated, and average hourly earnings rebounded. There was a 10-11 bp increase in both short- and long-term interest rates.

The increase in the implied rates of the Fed funds and Eurodollar futures strip indicate that sentiment has swung back toward where we have steadfastly been, and that is to favor a mid-year Fed hike. We feel more confident that the Federal Reserve will modify its forward guidance at next month's meeting to dilute the idea that the first rate hike is at least two meetings away, which is how Yellen helped investors understand what the FOMC statement meant by "patience".

The euro flirted with the 20-day moving average during most of the past week, despite the high drama between Greece's new government and its official creditors that worries investors. The euro has not managed… Read More …