Analysts at Brown Brothers Harriman explained that the US dollar rose against all the major and most emerging market currencies last week.
"After selling off following the ECB and FOMC meetings, the dollar found better traction. It was helped by widening interest rate differentials.
Regional Fed manufacturing surveys for March suggest the quarter is ending on a firm note. With new orders rising, it is reasonable to expect the momentum to carry into Q2.
Nearly half of the regional Fed presidents spoke last week, and the general takeaway is that the Fed's rate hiking cycle is likely to resume in the second quarter. Several reiterated what Yellen indicated at the press conference following the FOMC meeting, namely that April meeting is live.
There is a small chance of a hike then priced into the Fed funds futures, but we suspect that a strong employment report on April 1 will see the risks of an April move increase.
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One of technical factor that emerged last week was the beginning of the correction of the dollar's losses. This is most evident the in the Dollar Index and its biggest constituent, the euro.
The first thing to note is that the Dollar Index and euro have already retraced more than 61.8% of the move following the FOMC meeting (found near 96.10 and $1.1165 respectively.
The overshoot has been minor, meaning that both the Dollar Index and the euro are at potential turning points. However, the technical indicators point to a further dollar recovery."
