The dollar could dominate markets today, as traders watch February's retail sales and weekly jobless claims.
Although stocks traded relatively quietly Wednesday, the dollar was the standout Wednesday and traders across financial markets were obsessed with it. The dollar index hit a fresh 12-year high, and the euro continued to melt down, trading at $1.05 to the dollar. Analysts are predicting a euro-dollar parity within a very short time.
Gold prices also fell, held back by the U.S. currency's gains.
Treasury yields were lower at the long end of the curve, while yields on some shorter-term duration notes were higher. Those are the ones most affected by Fed rate hikes.
Markets have been bracing for a potential tightening signal from the central bank when it meets next Wednesday and Thursday. The move toward a rate hike comes just as the European Central Bank embarked on an opposite policy path this week, when it launched a bond-buying program.
"The dollar, to me, looks parabolic," said John Canally, market strategist and economist at LPL Financial. "Did anything change in the last week to drive it like this? Everyone has known the ECB was going to do quantitative easing. The stronger dollar makes it less likely the Fed is going to raise rates because it pushes down on commodity prices. It's a strange mix we're getting this week. It's odd but we're not in earning season so the market is looking around at other things."