Yesterday, we saw some interesting price action in USD pairs. In the last few weeks we have only seen negative flows in the USD as it has lost considerable ground.

But yesterday, the USD reversed in the afternoon after being dumped all day long. In the evening, all USD pairs reversed and the Buck ended up gaining around 100 pips across the board. That is unusual considering the recent losses.

The US capacity utilization of the economy and the industrial production picked up in the afternoon, but the reverse came a few hours later. The reason for this reverse was the rhetoric from some FED members, which sounded bullish to forex traders.

FED’s Kaplan said that “tax cuts have convinced him that the FED will need to hike three times this year” as opposed to 2 hikes that the market is expecting. He also said that “if there is any surprise in rate hikes, the chances are that there will be more than three in 2018”. Also, the improved employment “makes him feel strongly about rate hikes”.

And just like that, Kaplan turned hawkish

Basically, all of his speech was about interest rate hikes and it sounded hawkish. There was another FD member making some hawkish remarks as well yesterday, but I can’t remember who.

Kaplan has been pretty dovish, so the shift yesterday sounded pretty hawkish and USD traders loved it. It seems like the FED is slowly turning hawkish now. Janet Yellen will be out of office soon, so the market is starting to be cautious. This is good news for the USD and the USD buyers.