"The March rate hike probability already rests at 77% according to the Fed funds futures, implying that this is the market's base case scenario, and comments hinting anything different than that will come as a surprise", he added.
Whether the Federal Reserve decides to hike or not when its policy-making committee meets on 14-15 March, the movements in fixed income this week should serve as a warning to all those who have grown to believe - wrongly as it turns out - that the central bank is destined to follow markets rather than lead them. "The Fed has typically been viewed as reluctant to raise interest rates unless market-based expectations rise above a 50% threshold". USD/JPY briefly dipped in the latter part of the President's speech, but more than made up for the slide into the end of Wednesday as Fed hike expectations bloomed. Economist Mark Zandi of Moody's Analytics says USA officials are trying to "normalize" rates, which may mean they go a bit higher later this year. The Fed appear to be decidedly pushing the case for an imminent Fed hike and a positive performance from next week's jobs report could really help to clear the way for March.
The third rate increase of the current tightening cycle will be less momentous than the first. The cost for banks to borrow funds surged by the most since December 2015, when the Fed lifted rates from near zero.
But that was before some Fed officials began suggesting that the strengthening USA economy, signs of higher inflation and a surging stock market had bolstered the case for a rate hike.
"The Fed is likely to raise interest rates this month unless the U.S.jobs data due next week is bad", said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.
The Fed policymakers' words continued to boost the greenback on Thursday.
US Crude Runs 3-Day Bullish Streak
In January, while OPEC had claimed a 90% compliance rate, Reuters survey had pegged the compliance rate at 82%. The Organization of the Petroleum Exporting Countries reduced its oil output for a second month in February.
Oil prices rose, while gold (http://www.marketwatch.com/story/gold-heads-for-first-weekly-drop-in-five-ahead-of-feds-yellen-speech-2017-03-03) prices slid to finish the week with a 2.5% loss.
Trump took a measured tone in his keenly awaited speech on Tuesday, saying he was open to immigration reform, but failing again to provide much detail on his plans for tax reform and infrastructure spending.
The S&P 500 index showed two new 52-week highs and no new lows, while the Nasdaq recorded 24 new highs and 12 new lows.
Benchmark Brent crude futures were up 0.7 percent at $55.46 a barrel after closing down 2.3 percent in the previous session.
Some Fed officials suggested that the rise in inflation and the low 4.8 unemployment rate were evidence that the central bank was now close to achieving its dual mandates of maximum employment and stable prices. That was the largest 12-month gain in almost five years and just below the Fed's 2% target for inflation.