USD flying high as congressional testimony continues

Daily Currency Update

The USD rallied against all major currencies yesterday, during day one of the Congressional testimony. Federal Reserve Chairman, Jerome Powell, said that US interest rates are likely to head higher than policymakers had previously expected. Recent economic data has been coming in stronger than expected, a reversal to the deceleration it showed in late 2022. This could mean both a higher peak and terminal Fed funds rate, as well as a switch back to the more aggressive half-point rate hikes. The Fed funds futures have already moved to price in a 50 basis point hike at the March 22^nd meeting.

Stock markets were down amid testimony news, with the DOW, Nasdaq, and S&P 500 all finishing lower. Treasuries pushed higher, with the 2-year treasury bill topping 5% for the first time since 2007.

The US Balance of Trade deficit continued to widen, coming in at -68.3 billion versus the forecasted -68.9 billion. Automatic Data Processing employment came in better than expected this morning at 242,000 versus the expected 200,000. This release is seen as a good predictor for the non-farm payroll report coming out on Friday.