The USD has regained its composure and heading north as we see the USD Index, a measure of the strength of the USD against a basket of currencies, making a b-line for last month’s highs and potential beyond as market participant price in bullish speeches by Fed`s Williams and Dudley, who have put a March rate hike firmly on the table. Both members stated that rate hikes were imminent, swinging the odds for a March rate hike to 80% in some cases.

The EURUSD popped below 1.0550 while the GBPUSD broke stern support at 1.2400 to trade as low as 1.2350 while the USDJPY was impacted most as we saw the pair pull up over 175 pips to trade at 113.50 after making lows of 111.75. Commodities, due to being priced in USD, were sold off aggressively as we saw gold drop off its perch, losing over 20 USD on the day.

The USD strength and gold weakness are expected remain the status quo provided that economic data and the upcoming speeches by Fed members remain positive. Else, we could see the USD give back some of its recent gains as market react quickly to unwind their optimistic positioning.

Today’s key data out of the US comes in the form of the ISM Manufacturing PMI, expected at 56.2. The figure represents an index based on surveyed purchasing managers in the manufacturing industry and is regarded as a leading indicator of economic health because businesses react quickly to market conditions, making the purchasing managers, who need to acquire on behalf of the business, likely to be knowledgeable on the company’s views and expectation of the future. A better than expected release will see the USD strengthen across the board as the USD Index makes a b-line for Feb highs while a worse than expected release will see the USD weaken across the board, giving some respite to troubled sellers.

Also of note are the speeches by 2 Fed members, namely Kaplan and Brainard. Markets will be watching to see how hawkish they are, and if they too agree with the previous comments which put a march rate hike on the table, we will see the USD Index soar to its December highs while gold tumbles as markets price in the increase probability of a rate hike. However, a more dovish stance will see yesterday’s hard work by the bulls unwound.