The US dollar jumped overnight as lifted by stronger than expected core inflation data as well as comments from Fed officials. San Francisco Fed John Williams said in an interview that the first rate hike could happen "this summer or this fall" if data come out as he expected. Meanwhile, he's also optimistic that US will release full employment by the end of this year and inflation will reach 2% level by the end of next year.
He noted that Fed should start raising rates before that. Meanwhile, St Louis Fed James Bullard said Fed should drop the word "patient" in the next FOMC statement to give it flexibility to hike rates in Summer. He said he'd be "for starting a little bit earlier on the normalization process. It's not tightening." Also, he noted that today's inflation data showed the core "being a little hotter" than expected and would "bolster confidence a little bit" that inflation is heading back towards target.
Meanwhile, he noted that even if Fed starts to hike rate, that's only "normalization" rather than "tightening" as Fed still have very accommodative policy. Also, Bullard said that labor markets are "improving so rapidly". And it would "seems like a bit little extreme" if unemployment drops below 5% and Fed still keeps rate near zero.
The dollar's rise suggests that the triangle consolidation from 95.48 could have completed at 94.05 already. We'll stay cautiously bullish as long as 94.05 holds and expect a break of 95.48 resistance today or early next week. In that case, the dollar index should have a test on next key long term fibonacci level at 50% retracement of 121.01 to 70.69 at 95.85 next.
Released from Asian session, Japan national CPI slowed to 2.2% yoy in January, below expectation of 2.3% yoy. Tokyo CPI was unchanged at 2.2% yoy in February as expected. Unemployment rate rose to 3.6% in January, industrial production dropped -2.0% yoy, household spending dropped -5.1% yoy. From New Zealand, building permits dropped -3.8% mom in January, NBNZ business confidence rose to 34.4. UK Gfk consumer sentiment was unchanged at 1 in February.
Looking ahead, German CPI and Swiss KOF leading indicator will be the main focus in European session. US Q4 GDP revision, Chicago PMI and pending home sales will be featured in US session.