The stage is set perfectly for the rate hike expected in the next week’s Fed meeting as the data revealed that U.S. private sector payrolls rose sharply in the month of February. This led to a surge in dollar price, which was at its highest level in the last five days.
The vice president and co-head of ADP Research Institute, Ahu Yildirmaz said, “February proved to be an incredibly strong month for employment with increases we have not seen in years. Gains were driven by a surge in the goods sector, while we also saw the information industry experience a notable increase.”
The dollar index was up 0.1% at 102.13, which is just a little less than 102.26, touched on March 2 peak, which was the best level since Jan. 11.
On Wednesday, the ADP National Employment Report released that in February the private payrolls grew by 298,000, which is the biggest since December 2015. This figure was much above the expectations of economists’ who had quoted an increase of 190,000. Tomorrow the U.S. Labor Department’s non-farm payrolls figures are to be released, which includes both private-sector and public-sector employment.
Based on all these developments, the traders now feel that there is 90 percent possibility that rate hike will happen at the March meeting of Federal Reserve. Last month, this possibility was given as 30% by the market analysts. Other than these developments, the hawkish comments from top Fed officials, including that of Chair Janet Yellen, have boosted the market sentiments and the bets are raised for a rate hike.
The chief currency strategist at Oanda in Toronto, Dean Popplewell said, “The market certainly got ahead of itself before the Federal Open Market Committee meeting next week.”
The European Central Bank’s (ECB) meeting is scheduled today, but in spite of euro at its lowest since March 3, there is a little expectation from this meeting. Popplewell, giving his views on the ECB President Mario Draghi said, “Draghi’s hands are relatively tied. He cannot be too aggressive or hawkish, despite inflation ticking up towards their desired levels, hence why the euro is basically trading in a tight range.”
The Reuters poll that was conducted last week, however, signalled that the economists expect ECB to signal a policy shift happening either at the end of 2017 or early 2018.