Dollar extends rally as confidence for Fed rate hike holds; pound remains weak

The dollar gained again Wednesday, underpinned by expectations the late-week employment report will further bolster expectations for a buck-boosting Federal Reserve interest-rate increase on March 15.

The ICE Dollar Index
DXY, +0.13%
which measures the currency against a basket of six major rivals,was trading up 0.1% at 101.90. The index remains close to the seven-week high it hit last week when a chorus of Fed officials, including Chairwoman Janet Yellen, signaled their comfort level with hiking rates again sooner versus later.

Read: 5 ways the Fed rate hikes will hit global markets

Futures prices indicate a rate hike stands at an 83 percent probability. Investors will also be alert to signs for additional hikes in 2017 when the Fed wraps up its two-day gathering next week.

First, Wednesday brings a snapshot of private-sector U.S. employment, which sometimes foreshadows the results in the broader nonfarm payrolls report due out Friday morning.

The pound was again an active mover, with budget and economic uncertainty adding to Brexit developments this week. Prime Minister Teresa May this week suffered another implementation setback in the U.K. split from the European Union as parliament worked to slow the process with additional conditions.

On Tuesday, the pound
GBPUSD, -0.2213%
weakened against the dollar, buying $1.2149, a fresh seven-week low, and down from $1.2199 late Tuesday in New York. The pound has given up ground to the dollar in eight of the past nine sessions.

The general consensus going into todays U.K. budget is that Chancellor Philip Hammond will disappoint and that the GBP/USD may extend its declines towards $1.20, said Fawad Razaqzada, market analyst, at He is well aware of Brexit risks and may thus predict a more turbulent economic outlook.

The risk therefore is if he expresses more optimism about the economy and delivers more fiscal spending plans than expected. If thats the case, the GBP/USD could easily rebound, the analyst added, in a note. It is worth pointing out that those who had sold the pair, may cover their positions now, triggering a short-squeeze or relief rally.

In other trading, the euro
EURUSD, -0.0946%
bought $1.0561 compared with $1.0568 late Tuesday. The euro has weakened against the dollar in six of the past seven sessions.

And against its Japanese counterpart, the dollar
USDJPY, +0.28%
bought 楼113.99, barely moved from the 楼113.98 late Tuesday in New York.