St. Louis Fed President William Poole triggered the bullish dollar sentiment by warning that the U.S. economy still has a “great deal of momentum” and that the Fed may have to “step a little harder on the brake” if economic data continue to surprise on the upside.

This helped to give traction to forecasts that the Fed may yet have to raise interest rates as far as 5.50%, from 4.50% currently, by the middle of the year.

Added to this it would appear that investors seem to be taking a more jaundiced view of bullish comments from European Central Bank President Jean-Claude Trichet, who last week hinted that more rate rises are needed to keep inflationary pressures in check.

The dollar also pushed ahead against the yen, as more in the market take the view that the Bank of Japan won’t only delay any shift in monetary policy until next month, but that the shift, which will consist largely of a gradual reduction in money-market liquidity, won’t actually have an impact on interest rates until early next year.

Data for the day is very quiet from all the majors, with the only piece of note already released in the form of the UK Nationwide Consumer Confidence figure. After a relatively solid +98 last time out the figure materlialised at a still respectable +94 for the month of February.

Overnight tonight we also have the RBNZ Monetary policy statement, and after the cash rate was left unchanged at the latest meeting, look for discouraging signs of further easing later in the year, although sliding domestic demand is fast becoming a theme in New Zealand.