Strong Housing Data Pushes US Dollar Higher Ahead of FOMC Decision

Positive signs emerged from the US housing market as both Housing Starts and Building Permits in February surpassed expectations. This data bolstered the US Dollar Index (DXY) which climbed to its highest point since early March, currently hovering around 104.00; specifically 0.05% up at 103.836.

All eyes are now on the Federal Open Market Committee (FOMC) meeting on Wednesday. The Fed’s latest economic projections, known as the Dot Plot, will be closely scrutinized for any dovish hints that could weaken the dollar.

While markets anticipate the Fed to maintain its hawkish stance on interest rates, strong housing data and upcoming guidance from the central bank could influence future policy decisions.

The current market consensus suggest the Fed holding rates steady, with a slight chance of a cut in May and a more significant possibility in June. However, this outlook might shift based on the FOMC’s announcement.

US Treasury yields also reacted to the news, with short-term yields like the 2-year currently at 4.70%. Longer-term yields, such as the 5-year and 10-year, remain near multi-week highs at 4.31% and 4.30% respectively.