The bullish dollar case I argued remains intact as February draws to a close. The bull case was based on a conviction of the underlying resilience of the US economy, which in turn would prompt more Fed tightening that the market appreciated. Widening interest rate differentials would lend support to the greenback.
At the end of last year, the market has discounted a 4.75% peak in the Fed funds rate. Second thoughts were seen in January. The July Fed funds futures contract is finishing Feb about 30 bp below when it finished last year as the market anticipates a 5.00% Fed funds at mid-year.