The dollar index (DXY) rose by 0.61% on Tuesday, reaching a 3.25-month high, as surging oil prices increased inflation expectations and reduced the likelihood of additional Federal Reserve rate cuts. Market expectations for Fed easing have decreased, with money markets now pricing in 37 basis points of rate cuts this year, down from 60 basis points last Friday. Additionally, a slump in the stock market has raised liquidity demand for the dollar.
The Eurozone’s February Consumer Price Index (CPI) rose 1.9% year-on-year, surpassing expectations of 1.7%, which may influence the European Central Bank’s (ECB) upcoming policy. Conversely, the euro fell to a 3.25-month low and decreased by 0.56% on Tuesday, in part due to a 24% spike in European natural gas prices. Meanwhile, the Japanese yen hit a 5-week low against the dollar following an unexpected rise in Japan’s January jobless rate to 2.7% and pressures from rising crude oil prices.
Gold prices fell by $187.90 (3.54%) and silver by $5.380 (6.05%) as rising bond yields and the strengthening dollar pressured precious metals. Despite geopolitical risks and strong central bank demand for gold, speculative selling in the context of falling equity markets has been prevalent.
