The U.S. Dollar is trading in favorable ranges against the majority of it’s G10 peers this morning as Traders continue to monitor the situation in Iran.
The Israeli Defence Forces (IDF) conducted a series of strikes against Iranian infrastructure and regime personnel in Tehran overnight, which feels contradictory to President Trump’s de-escalatory statements yesterday, but it is important to keep in mind that the IDF is operating at the direction of Israeli leadership that has asserted operational independence. Similarly, the Islamic Revolutionary Guard Corps (IRGC) of the Iranian Armed Forces conducted their own series of strikes on Israel and stepped up threats to deploy mines in the Strait of Hormuz in retaliation to any attack on Iran’s islands or coasts. The IRGC also reaffirmed that they have had no contact of any kind with President Trump, and continue to seek the complete withdrawal of the US from the region, which has fueled speculation that Trump may be negotiating with a dissident rather than the current regime. Given that hostilities are not cooling, as many Traders had hoped following yesterday’s statement, the Dollar risk premium is firmly justified this morning.
What to Watch This Week…
- USA Online is always open
JPY ⇓
The Japanese Yen is down against the Buck this morning following a Consumer Price Index (CPI) release that came in cooler than expected at 1.3% year-over-year versus 1.5% expected. While this data point on it’s own is not enough to influence the Bank of Japan with regard to tightening monetary policy in the short term, CPI is likely to increase significantly as the effect of the Iran conflict, primarily energy costs, filters into the economy. Traders are pricing in a 61.2% chance of a hike at the BoJ’s next policy meeting in April.
EUR ⇓
The Euro is down versus the Greenback this morning following Purchasing Managers’ Index (PMI) releases across the Eurozone that ranged from mixed to weak, with the headline reading coming in at 50.5 for March compared to 51.9 for February. Private-sector activity has risen at the slowest pace since last May as the war in Iran continues to fuel inflation concerns, and deterioration in the European Union’s two biggest economies, namely Germany and France, is signaling that the effects may not be as short lived as previously considered, or hoped.
