The dollar index (DXY) surged by +0.28% to reach a new 3.5-month high amid ongoing tensions in Iran, which are affecting crude oil prices. The rise in oil prices poses a threat to the European and Japanese economies that depend on energy imports, thereby weakening their currencies. Although the dollar gained, economic reports revealed a downward revision of the Q4 GDP to +0.7% from +1.4% and weaker-than-expected new orders in January.
Key data from January showed personal spending increased by +0.4%, surpassing the +0.3% forecast, while personal income rose by +0.4%, falling short of the predicted +0.5%. The core PCE price index rose by +3.1% year-over-year, matching expectations and marking the highest increase in 1.75 years. Job openings rose by +396,000 to 6.946 million, outpacing expectations of 6.750 million.
As of today, the euro fell by -0.32% to a 7.5-month low, influenced by the dollar’s strength and rising crude prices. Additionally, the yen showed signs of recovery from a 20-month low against the dollar. Market forecasts suggest a 3% chance of a +25 basis point rate hike by the ECB and a +7% chance for a BOJ rate increase at their respective meetings on March 19.
