US Dollar Remains Firm Ahead of US Durable Goods Orders and Central Bank Speeches

The US dollar remains strong on Monday, holding near a seven-week high after a series of positive economic indicators suggested that the Federal Reserve will need to continue raising interest rates. The market is reacting positively to the news, with investors adjusting their expectations for US interest rates to remain higher for longer. The personal consumption expenditures price index increased by 0.6% last month, and investors are now pricing rates to peak at 5.4% in July and remain above 5% through the end of the year.

Although there is some uncertainty about the pace of future Fed interest rate hikes, there is optimism in the market, with some analysts predicting a possible 50 basis point hike if inflation remains high and growth continues. This sentiment is reflected in the two-year US Treasury yield, which has moved up in step with interest rate expectations, just shy of the three-month high it reached on Friday.

The European Central Bank and the Bank of England are also expected to raise interest rates, and the market is adjusting accordingly. The euro and sterling are pinned near seven-week lows, with the yen strengthening 0.12% to 136.29 per dollar.

While the dollar keeps strength, there is some weakness in other currencies, such as the Aussie and the kiwi, which have both fallen versus the greenback. Nevertheless, there are positive indicators in the market, and investors are feeling optimistic about the future. Overall, it seems that the market is poised for growth, and there is reason to believe that this positive trend will continue in the weeks and months ahead.

Events of the day

Looking at the economic calendar for Monday, February 27, 2023, the most significant event is the release of US Durable Goods Orders for January. The previous report showed a strong increase of 5.6%, but the consensus forecast for this report is a decline of 4%, which could lead to some market volatility. Investors will also be watching for the Nondefense Capital Goods Orders ex Aircraft, as this figure is a key indicator of business investment.

There are also several speeches by central bank officials scheduled, including Bank of England's Broadbent and ECB's Lane, which could provide some insight into monetary policy and economic outlook. Any hints of potential policy changes could affect the markets.