The USD remains close to its strongest levels in 10 months
What’s happening:-
The US dollar dipped slightly this morning but stayed close to its 10-month high.
What happened:-
The United States is preparing to unveil a coalition of nations tasked with escorting tankers through the Strait of Hormuz, a move driven by ongoing tensions with Iran.
Meanwhile, the potential for dialogue between the US and Iran has diminished, which in turn has reduced the appeal of safe-haven assets.
The US dollar edged down slightly this morning but remained near its 10-month high
Why it matters:-
The escalating conflict between the US and Iran has entered its third week, intensifying global energy concerns. This follows a statement made last week by Iran's new Supreme Leader, asserting that the Strait of Hormuz will effectively stay closed.
Despite heightened tensions, oil prices showed stability this morning. This comes in the wake of US airstrikes over the weekend targeting military assets near Iran's critical oil-export hub on Kharg Island. Additionally, Washington warned Tehran that any attempts to interfere with the Strait of Hormuz could lead to further strikes against its energy infrastructure.
Meanwhile, US economic data released last week painted a mixed picture. Initial jobless claims showed a slight decline of 1,000, bringing the total to 213,000 for the week, just under market expectations of 215,000. The inflation rate for February remained steady at 2.4%, consistent with forecasts, while the Fed’s core PCE price index—a key inflation measure—rose by 0.4% in January, mirroring December’s growth. However, the US economy expanded at an annualised rate of just 0.7% in the fourth quarter, marking its weakest pace since the first quarter of 2025.
On the currency front, the US dollar index edged down by 0.1% this morning to 100.25. Nevertheless, it remains near its highest level in 10 months as rising energy costs fuel inflation concerns and dampen expectations of an imminent interest rate cut by the Federal Reserve.
The dollar fell in global markets today
What to watch:-
Investors are expected to closely monitor developments in the ongoing US-Iran conflict, which could influence market sentiments. Additionally, attention will be directed toward statements from key central banks as they hold their monetary policy meetings this week. The European Central Bank, Reserve Bank of Australia, Bank of Japan, and Bank of England are all convening for their first meetings since the Middle East crisis began.
On the data front, several U.S. economic indicators are set for release today. These include the NY Empire State Manufacturing Index at 16:30 UAE Time, industrial production at 17:15 UAE Time, and the NAHB Housing Market Index at 18:00 UAE Time. Expectations for the NY Empire State Manufacturing Index suggest a decline to 3.8 in March, following a drop to 7.1 in February from 7.7 in January. Meanwhile, industrial production is anticipated to increase by 0.2% in February after climbing 0.7% in January. The NAHB/Wells Fargo Housing Market Index is projected to edge up to 37 in March from 36 in the previous month.
The U.S. dollar has started the week on a downward trend as central banks prepare for a series of key updates
The U.S. dollar is experiencing a weak start as central banks gear up for a pivotal week of monetary policy decisions. Scheduled rate announcements include the Reserve Bank of Australia on Tuesday, the Federal Reserve on Wednesday, and the Bank of Japan on Thursday, along with decisions from the Bank of England and the European Central Bank also slated for Thursday.
With these meetings marking the first significant monetary discussions since the onset of the Middle East conflict, market sentiment remains tense. Concerns over heightened inflation risks and slowed economic growth have added layers of complexity to central bank policies, amplifying market unease.
The U.S. dollar index, which tracks its performance against a basket of six major currencies, has dipped to 99.97 from Friday’s close of 100.36. The euro has strengthened, with the EUR/USD pair rising 0.63% to 1.1488 from 1.1416 on Friday. Similarly, the GBP/USD pair climbed 0.51%, reaching 1.3294 from the previous week’s close of 1.3226. Ahead of an anticipated rate hike by the Reserve Bank of Australia on Tuesday, the Australian dollar surged more than 1.2%, with the AUD/USD pair jumping to 0.7065 from 0.6981 on Friday. Meanwhile, the Japanese yen has gained ground, pushing the USD/JPY pair down by 0.39% to 159.10, compared to Friday’s level of 159.73.