Market Drivers – US Session: Dollar Wobbles as Economic Fears and Fed Caution Grip Markets

The US dollar is showing signs of vulnerability, lingering near the lower end of its recent trading range as concerns mount over a potential economic slowdown in the United States. This bearish sentiment, coupled with growing caution ahead of the Federal Open Market Committee (FOMC) meeting, has created a palpable sense of unease in the markets.

The Dollar Index (DXY), a key measure of the dollar’s value against a basket of currencies, continued its downward trend on Monday, hovering in the low-103.00s. Investors are keenly awaiting the release of crucial US economic data, including Building Permits, Housing Starts, Import/Export Prices, and Industrial and Manufacturing Production, alongside the API’s weekly report on US crude oil supplies. These figures will provide further insights into the health of the US economy and potentially influence the Fed’s upcoming policy decisions.

Meanwhile, the euro has capitalized on the dollar’s weakness, with EUR/USD modestly rising and breaching the critical 1.0900 level. Market participants are now focusing on the release of Economic Sentiment data from Germany and the Eurozone, as well as the bloc’s Balance of Trade results, to gauge the strength of the European economy.

Across the Channel, the British pound has also experienced a resurgence. GBP/USD reversed its recent losses and flirted with the psychological 1.3000 mark, driven by renewed dollar selling. Looking ahead, the UK labour market report and the Bank of England’s (BoE) interest rate decision, both scheduled for March 20, will be closely watched.

In the East, USD/JPY extended its Friday gains, briefly surpassing the 149.00 level before losing momentum. The focus now shifts to the release of the Tertiary Industry Index.

The Australian dollar has also benefited from the prevailing risk-on sentiment, with AUD/USD breaking above the 0.6300 level and reaching multi-day highs. Investors will be paying close attention to the upcoming speech by RBA’s Hunter.

Commodity markets are also reflecting the shifting dynamics. WTI crude oil prices continued their upward trajectory, surging past the $68.00 per barrel mark. Gold prices maintained their positive momentum, hovering around the key $3,000 per troy ounce level, supported by the slightly weaker dollar and mixed US yields.