The U.S. Dollar is trading negatively against its peers as the Iran conflict enters its third week and ahead of one full of central bank activity.
Unfortunately, de-escalation has not occurred, and energy markets continue to suffer a major blow. Brent crude oil pushed above $100.00/barrel especially after this weekend’s U.S.-led attack on Kharg Island, the main exporting oil hub for the Iranians. Meanwhile, nations are not heeding the call by the White House to assists with war ships in order to open the Strait of Hormuz, with Japan and Australia the latest to say they will not be sending their navy vessels. Markets realize the U.S. ability to absorb the shock and alleviate global risk of significant economic slowdown.
On Wednesday, all eyes will be on monetary policy as the Fed meets and has its press conference at 2PM. Questions will most certainly surround the officials’ thoughts on inflation now that conflict has entered the equation. While one 25-basis-points interest-rate cut is fully priced in, a second one for the remainder of the year is basically no-chance at the moment. Global stock exchanges are mixed with the turmoil and a bit of good news out of China with Retail Sales and Industrial Production for January and February above expectation. Buck recovery could arise from Fed confidence later in the week regarding the lack of need to be stimulative.
What to Watch This Week…
- Fed policy decision Wednesday, 2PM
- BOJ, BOE, ECB all meet Thursday
- USA Online is always open
EUR ⇑
The Euro is up over the Buck after being down last few weeks primarily as a result of the inflationary effects experienced as the armed conflict has become wider and riskier in the long-term. European Central Bank officials have been mostly driven by economic indicators, but this time the discussion will be different. On Thursday, we will get plenty of word from financial authorities as the ECB also joins the Bank of Japan as well as the Bank of England in providing guidance or perhaps raise even more questions.
AUS ⇑
The Australian Dollar came in a bit stronger this morning, floating at high levels after reaching its best value over the Buck since May 2022 last week. Tomorrow, the Reserve Bank of Australia meets and is widely expected to actually hike interest rates. It would mark the second time it raises interest rates this year. With China’s economy holding up, it seems Australia’s economy has been deemed strong enough to withstand higher borrowing costs.
