The U.S. Dollar is trading in favorable ranges, climbing to its best overall value since January 9th after rising by 1.2% this week according to the Bloomberg Dollar Spot Index.
March has been characterized by armed conflict and the consequences of it with the troubles in the Strait of Hormuz, the most crucial part of the story. With a quarter of the world’s energy fuels going through this channel, the intense fighting is keeping shipments from leaving with oil, fertilizer and other key raw materials compromised.
Since the Buck is the most used currency for trading petroleum, the “petro-dollar” effect of needing more dollars in order to afford higher costs is making the appreciation inevitable. West Texas Intermediate Crude oil rose above $86.0/barrel for the first time since 2024. To understand why this effect is strengthening the USD, read our Outlook for the remainder of March.
At the time of writing, the release of Non-Farm Payrolls revealed quite a surprise with a negative print registered instead of the expected expansion. February NFPs came in at (-92K), instead of rising by 55K. All numbers related to the Employment Situation are shockingly poor with the Unemployment Rate also rising from 4.3% to 4.4%. For now, FX moves are limited, and direction is mixed.
What to Watch This Week…
- Monex USA Online is always open
EUR ⇓
The Euro’s value sank this week, and it is currently trading around its weakest level since Thanksgiving time, end of November. With Brent Crude rising, the fear is no longer just about inflation, but that economic growth will be even more difficult to achieve. This morning saw the release of Q4 Gross Domestic Product, which advanced by just 0.2% instead of 0.3% estimated. If the war continues, the Euro-zone faces a two-front energy squeeze with Ukraine/Russia and now Iran.
MXN ⇓
The Mexican Peso fell as most peers, down to its weakest points against the Buck since January 13th. As the turmoil continues over the Middle East instability, emerging and developing economies will have to adjust to a more complicated picture especially when it comes to trading energy. While nothing is guaranteed or very clear, an end to the conflict may bring about a rally of recovery since there are reports of interest from various parties to cease fire and reach a deal. Developments are very fast in this situation, but it is clear for now the U.S. Dollar is having a moment after a stretched period of weakness that had not been seen in decades.
