After the strong bullish reversal in the USD at the beginning of February, buyers were hesitating for about a week, as they awaited for more data as proof for an economic rebound in the US. As the week closes, we have seen plenty of reasons for USD strength, which is closing the week pretty bullish.

The retail sales report on Tuesday showed a strong bounce in January, after the decline in December. The PPI (producer price index) data was also stronger than expected, indicating that consumer inflation CPI will likely pick up again in the coming months.

FED members came out making hawkish comments on interest rates, with Bullard saying that he advocated for 50 bps at the most-recent FOMC meeting. He openly talked about getting to a restrictive stance faster and added, that he sees the terminal top rate at 5.25-5.50% as appropriate. It’s clear to me that the playbook from the FED now is to advocate getting to 5.00-5.25% or 5.25.5.50% and staying for longer.

Comments from Bullard to Reporters

• At this point, sees policy rate in the range of 5.25-5.50% as appropriate
• Says he’s skeptical labor market will cool as much as some expect but inflation can still fall as businesses compete and expectations remain low
• Drop in long term yields is a vote of confidence inflation will fall
• I wouldn’t rule out anything at upcoming Fed meeting
• Advocated for a half-point hike at the last meeting to get adequately restrictive

The market is taking this as hawkish but if Bullard isn’t pushing for higher rates, who is? The comment about supporting 50 bps at the last meeting is no surprise, it was something he was open about. EUR/USD failed at 1.08 earlier this week, which seems like a decent resistance level now and this pair is looking bullish, with the DXY index resuming the bullish reversal this week after stagnating last week.

EUR/USD Live Chart