Forex Today: US Dollar and Oil gains pause as major central bank week begins

Key Market Updates for Monday, March 16

As the new week begins, crude oil prices have slipped slightly after an initially strong start, while the US Dollar Index is pulling back following a significant gain of over 1.5% last week. Later today, Statistics Canada is set to publish February's Consumer Price Index (CPI) figures. In the United States, the economic agenda includes February's Industrial Production numbers and the NY Empire State Manufacturing Index for March. Looking ahead, major central banks—including the Reserve Bank of Australia (RBA), Bank of Canada (BoC), Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE), and Bank of Japan (BoJ)—are scheduled to hold policy meetings throughout the week.

Geopolitical Developments

Over the weekend, US forces targeted sites on Kharg Island, a vital Iranian base in the Persian Gulf, and cautioned that oil facilities could be next if Iran continues to disrupt shipping in the Strait of Hormuz. Former President Trump has urged allied nations to assist in safeguarding this crucial waterway. According to the Wall Street Journal, the White House is preparing to announce a multinational coalition to escort vessels through the region.

Within Europe, EU foreign ministers are reportedly considering a naval mission in response to the effective closure of the Strait of Hormuz, while the UK is planning to deploy minesweeping drones to help maintain oil export routes. Japanese Prime Minister Sanae Takaichi stated that Japan is evaluating measures to protect its ships in the Middle East but currently has no intention of sending naval forces to the area.

Energy and Currency Markets

US Energy Secretary Chris Wright expressed optimism that the ongoing conflict could be resolved in the coming weeks, predicting a recovery in oil supplies and a subsequent drop in prices. West Texas Intermediate (WTI) crude opened the week with a minor upward gap, briefly reaching $100 per barrel before easing back toward $98.

The US Dollar Index is hovering near 100.30 during European trading hours, after reaching its highest point since May above 100.50 last Friday.

Precious Metals and Major Currency Pairs

Gold (XAU/USD) experienced a sharp decline of nearly 3% last week, falling to its lowest level in almost a month below $4,970 during early Asian trading on Monday. However, the metal has since rebounded above $5,000 in European markets.

• EUR/USD has stabilized and is recovering toward 1.1450 after suffering significant losses in the previous week.
• GBP/USD is holding onto modest gains near 1.3250 in Monday's European session.
• AUD/USD is gaining momentum at the start of the week, trading above 0.7000 with a daily increase of more than 0.5%. The RBA is anticipated to raise its policy rate by 25 basis points to 4.1% following its March meeting.
• USD/JPY advanced over 1% last week, marking its fourth consecutive week of gains. The pair is now correcting lower, trading below 159.50 in early European hours. Japan’s Finance Minister Satsuki Katayama indicated on Monday that authorities are ready to take strong action in the foreign exchange market if necessary.