The Dollar Index (DXY00) is up +0.27% today.
The dollar sees support from today’s rise in oil prices to $100 per barrel, which is tough for Fed policy. Also, high oil prices are good for the dollar because the US is the world’s largest oil producer.
The dollar continued to be weakened by last Friday’s weak US economic news, which included a -92,000 decline in US February payrolls and a -0.2% m/m decline in US January retail sales.
Exchange markets are discounting odds of a -25 bp rate cut at the next policy meeting on March 17-18 at 4%.
The dollar continues to decline due to a weak outlook for interest rate differentials, with the FOMC expected to cut interest rates by at least -25 bp in 2026, while the BOJ and ECB are expected to raise rates by at least +25 bp in 2026.
EUR/USD (^EURUSD) is down -0.45% today. The euro is falling due to the strength of the dollar. Also, the recent rise in oil prices is negative for the Euro as the Eurozone economy is highly dependent on imported oil and natural gas.
Swaps discount a 1% chance of a +25 bp rate hike by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) is up +0.39%. The yen looks weak today on a fresh rise in oil prices. High oil prices hurt Japan’s economy, which is heavily dependent on imported energy.
Markets are discounting a +5% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) is down -53.1 (-1.02%), and May COMEX silver (SIK26) is up +0.164 (+0.19%).
Gold prices are trading lower today amid prolonged excitement and a strong dollar. In addition, today’s fresh rise in oil prices puts pressure on President Trump to end the war with Iran as soon as possible.
Still, the precious metal has fundamental support for safe-haven demand linked to concerns that the US-Israeli war on Iran would escalate. Iran’s Council of Experts this weekend elected hardliner Mojtaba Khamenei, the son of Ayatollah Ali Khamenei, as Iran’s new Supreme Leader. President Trump said he was “not happy” with the new leader’s choice.
Strong central bank demand for gold is also supporting gold prices, following recent news that bullion held in China’s PBOC reserves rose to 74.19 million troy ounces from 40,000 ounces in January, the 15th consecutive month the PBOC has increased gold reserves.
