The dollar index (DXY00) today is mildly lower by -0.14%. The dollar is trading lower on today's sharp decline in oil prices, which is dovish for Fed policy. However, the dollar has underlying support from today's +2.3 bp rise in the 10-year T-note yield.
Today's existing home sales report was supportive of the dollar. US Feb existing home sales rose by +1.7% m/m to 4.09 million, stronger than expectations for a decline to 3.88 million.
An Iranian drone attack today caused the biggest refinery in the UAE at the Ruwais Industrial Complex to halt operations due to a fire in the complex. Also, Iran's semi-official Mehr news agency reported an explosion today involving a tanker near Abu Dhabi, but no further details were available.
Despite those disruptions, April WTI crude oil futures prices are down -9% today, erasing part of the sharp rally seen in the past 1-1/2 weeks. Oil prices on Monday spiked to a high of $119 per barrel Israel over the weekend bombed 30 Iranian fuel depots. However, WTI oil prices have since fallen to the $86-per-barrel area after President Trump said on Monday that the Iran war is "pretty much" over, and after G-7 finance ministers said on Monday that the G-7 nations stand ready to release oil stockpiles if needed. At a press conference Monday evening, President Trump was asked when the war would end, and he answered, "I think soon, very soon."
G-7 energy ministers are meeting today beginning at 1:45 pm local time (8:45 am Eastern) at the International Energy Agency in Paris, with most ministers joining remotely, according to French Finance Minister Roland Lescure. Mr. Lescure said today, "We are gathering the G-7 energy ministers today here in Paris; we are going through the process but obviously all options are on the table," including an emergency oil stock release. He added, "We are ready."
Iran has shown no signs of backing down, despite the withering air campaign launched by Israel and the US. Iran's Assembly of Experts over the weekend appointed hardliner Mojtaba Khamenei as Iran's new supreme leader, the son of Ayatollah Ali Khamenei. Iran's new leader has close ties to Iran's powerful and entrenched Islamic Revolutionary Guard Corps (IRGC).
Swaps markets are discounting the odds at 0% for a -25 bp rate cut at the next policy meeting on March 17-18.
The dollar continues to be undercut by a poor 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 up +0.02%, on weakness in the dollar. The euro also has support from today's plunge in oil prices, which is a positive factor for the Eurozone economy.
Swaps are discounting a 0% chance of a +25 bp rate hike by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) is up +0.08%. The yen continues to see downward pressure from the recent spike in oil prices, even though oil prices are lower today. The Japanese economy is highly dependent on imported energy.
The markets are discounting a +4% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) today is up +117.1 (+2.29%), and May COMEX silver (SIK26) is up +4.757 (+5.63%).
Precious metals prices are seeing support from today's mildly lower dollar. Precious metals prices are also seeing support from the Iran war as the US Pentagon said today was its busiest day yet for bombing Iran. Also, the Strait of Hormuz remains essentially closed, and Iran is not expected to back down anytime soon from its retaliatory attacks. Iran's Assembly of Experts over the weekend appointed hardliner Mojtaba Khamenei as Iran's new supreme leader, the son of Ayatollah Ali Khamenei. President Trump said he is "not happy" with the choice of the new leader.
Strong central bank demand for gold is also supportive of gold prices, following the recent news that bullion held in China's PBOC reserves rose by +40,000 ounces to 74.19 million troy ounces in January, the fifteenth consecutive month the PBOC has boosted its gold reserves.
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high on February 27. Also, long holdings in silver ETFs rose to a 3.5-year high on December 23, though liquidation has since knocked them down to a 3.5-month low on February 23.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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