6:00 am GER Jan Factory Orders (exp 1.3%, prev -1.6%) 8:30 am US Q4 Productivity –revised (exp -0.1%, prev -0.5%) 9:00 am Bank of Canada Interest Rate Announcement (exp 3.75%, prev 3.75%) 6:45 pm Chicago Fed President Moscow Speaks. 6:50 pm JPN Feb M2 y/y (exp 2.0%, prev 1.9%)


Dollar fires in all cylinders after the usually hawkish Richmond Fed president Poole said the Fed may have to raise rates further, especially as growth exceeds expectations. His comments follow ECB’s JC Trichet’s attempt to deflect the market from anticipating an evident April rate hike. Poole said he was not going to deliver ex-ante rate hikes, but shall await the economic since he concluded that: “My sense is there is a great deal of momentum in the economy… it is momentum of the sort that says were going to keep rolling down the expansion here, and youre not going to stop this freight train easily”. But the fact that Poole is not a voting member of the Fed`s interest rate-setting committee this year did not prolong the dollar’s knee jerk reaction.


We do see a 20-25% possibility that the Fed will keep rates on hold on Mar 28. While fed funds futures had been consistently priced a 95-100% chance of a 25 bp move later this month, the odds eased to 90% on Monday, which explained the falling yield spread between 2 and 10 year yields to -5 bps from last week’s 13 bps after the 10-yr yield shot up to 4.74%, its highest since the Fed started raising rates in June 2004. The emerging tightening policies by the ECB, BoJ, BoC, SNB and the Fed is causing the backup in US interest rates, while expectations of further robustness in US nonfarm payrolls (exp 190K) supports the US growth story.