The dollar and Treasury yields are surging ahead of Senate testimony, in which Federal Reserve Chair Powell will call recent economic data “stronger than expected,” and warn “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes” – verbiage that suggests a half percentage point hike is on the table for the central bank’s March meeting.

In comments released on the Fed’s website prior to Powell’s appearance, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.

Powell will tell the Senate Banking Committee that “the ultimate level of interest rates is likely to be higher than previously anticipated”.