Investing.com - The U.S. dollar traded sharply higher against a slew of major currencies on Wednesday, as markets priced in a higher possibility of a March rate hike, after hawkish comments from several Federal Reserve officials.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, surged 0.28% to 101.61, after it hit a seven-week high earlier during the session.
The dollar continued to extend gains during mid-afternoon trade, despite a lack of specific policy details from President Donald Trump’s first major address to Congress on Tuesday, as a spike in expectations of a March rate hike remained front and centre.
Philadelphia Fed President Patrick Harker sparked hopes of March rate hike on Tuesday, when he reiterated his view that he expects the central bank to raise U.S. interest rates three times this year as long as the economy continues to strengthen.
New York Fed President William Dudley said he sees a rate hike in the "relatively near future", which echoed comments from San Francisco Federal Reserve Bank President John Williams, who suggested that the central bank has to raise interest rates in order to avoid a 'too hot' economy that in the end isn’t sustainable.
According to investing.com’s Fed rate monitor tool, more than 60% of traders expect a rate hike in March, compared to just over 30 percent on Tuesday.
Meanwhile, a flurry of top-tier U.S. economic data ensured the greenback held firm, as February U.S. Manufacturing data beat expectations while February U.S. construction spending was weaker than expected.
Elsewhere, GBP/USD declined 0.51% to $1.2317, after UK Manufacturing Purchasing Index (PMI) fell to 54.6 in January, analysts had expected the index to drop to 55.6.
EUR/USD bounced from session lows but ultimately remained under pressure to trade at $1.0564, down 0.13%, after mixed German employment data.
Germany's Federal Statistics Office reported on Wednesday that the unemployment rate was unchanged at 5.9% this month, in line with analyst expectations while
The number of unemployed people declined by 14,000 from a month earlier, compared to forecasts for a drop of 10,000.
USD/CAD traded at 1.3338 up 0.3%, after the Bank of Canada left interest rates unchanged while USD/JPY traded close to session highs at 113.65.