Forex Today: US Dollar pulls back as sentiment lifts amid declining Oil prices

Market Highlights for Tuesday, March 10

On Monday, a steep drop in crude oil prices contributed to a more optimistic market sentiment during the latter part of the day, which in turn weakened the US Dollar (USD). As Tuesday’s European session begins, the USD Index remains under the 99.00 mark and continues to slip lower. Today’s US economic calendar includes February’s Existing Home Sales figures, while the Automatic Data Processing (ADP) will release the four-week average for Employment Change.

Reports indicate that G7 Energy Ministers are set to convene virtually on Tuesday to consider releasing oil reserves in response to supply disruptions caused by the ongoing conflict involving Iran. After surging to its highest level since June 2022—topping $110 per barrel at the week’s open—West Texas Intermediate (WTI) crude reversed course and ended Monday with significant losses. Early trading on Tuesday sees WTI attempting a recovery, though it remains well below the $90 threshold.

Late Monday, US President Donald Trump suggested that military actions against Iran might soon conclude, describing the conflict as “very complete, pretty much.” In response, Iran’s Islamic Revolutionary Guard Corps (IRGC) asserted that Tehran would decide when hostilities end, not the US, and cautioned that regional oil exports could be blocked if US and Israeli strikes persist.

Major US stock indices finished Monday in positive territory, and futures for US equity indexes are currently up by 0.2% to 0.3%, signaling continued risk appetite in the markets.

After dropping toward $5,000 early Monday, gold rebounded, recovering much of its earlier losses. On Tuesday morning in Europe, XAU/USD is gaining momentum and approaching the $5,200 level.

EUR/USD reversed earlier declines to finish Monday with slight gains. The pair is holding steady as the European session gets underway, trading near 1.1650.

Fresh data from China revealed that exports jumped by 21.8% year-over-year in February, while imports rose by 19.8%. Building on Monday’s strong performance, AUD/USD continues its upward momentum, trading above 0.7100. On Tuesday, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser remarked that fluctuating oil prices and Middle East tensions present significant challenges for central banks, noting that policy responses will depend on the magnitude and duration of these shocks, which remain highly uncertain.

GBP/USD is benefiting from the improved risk environment, reaching a new 10-day high above 1.3470 early Tuesday.

USD/JPY is experiencing mild downward pressure, trading below 157.50 after modest losses on Monday.