Are foundations being set for another bout of dollar strength?

Much of the focus this week has been on The Federal Open Market Committee (FOMC) Chair Janet Yellen’s testimony in Washington. The key themes to take away from the semi-annual testimony is that in sentiment the FOMC is still hawkish, and unlike last year is still intending to raise interest rates at least three times this year. As a result the market is currently pricing in a rate hike for June this year and raised the possibility of a hike as soon as March. Currently 0.75% of interest rate hikes is priced in for 2017.

Economic data this week also backed up the tone from Yellen and the FOMC. Inflation ticked higher, despite the stronger dollar, while the retail sales numbers were extremely positive as the core figure (excluding cars) doubled the forecasted number. The manufacturing index out of Empire state and Philadelphia pushed higher while building permits picked up.