The U.S. Dollar is the G10’s biggest gainer after oil prices rose sharply overnight due to renewed tension in the Middle East.
Both Brent and WTI are up more than 6% this morning as record releases of oil reserves have seemingly failed to cap the surge in prices. The Dollar has continued to benefit from higher oil prices, both as a producer of oil and as a result of increased Dollar borrowing to purchase oil inventories. The surge in prices reflects a deep concern that the conflict will have long-lasting impacts on the energy market as more than 7.5% of global supply, and a greater percentage of exports, is disrupted.
Initial Jobless Claims for the week ending March 7th were released this morning and came in slightly better than expected at 213k vs 215k expected, putting the four-week average at 212k. Continuing Jobless Claims for the week ending February 28th were also released, coming in slightly worse than expected at 1850k vs 1849k expected. This suggests that the labor market is behaving largely as expected and helps to reinforce the idea that the Fed does not need to cut interest rates in the immediate future.
What to Watch This Week…
- Monex USA Online is always open
EUR ⇓
The Euro has slid against the Greenback for the third consecutive day as Traders amp up bets that the European Central Bank will hike interest rates by June as energy prices remain elevated as a consequence of the war in Iran. European Crude Oil (Brent) was up over $101 a barrel overnight, before settling over $98 a barrel this morning. Traders are currently pricing in a hike by June, but ECB policymakers have warned a hike may be needed sooner if energy prices continue to rise.
JPY ⇑
The Japanese Yen is the G10’s sole gainer against the Buck this morning as the Yen approaches it’s Year-to-Date high. The Yen is particularly vulnerable to further declines due to Japan’s reliance on Middle Eastern energy imports. We are near the range where we were talking about potential intervention from the Bank of Japan a few months ago, but the bar has certainly shifted as the Dollar has gained on a fundamental basis, rather than positioning. This makes it harder for Japanese monetary authorities to justify intervention without a particularly disorderly move.
