Forex Today: US Dollar holds steady as sentiment weakens amid climbing Oil prices

Market Overview for Tuesday, March 17

On Tuesday, investors are showing a preference for safer assets as oil prices climb once again. This shift has provided support for the US Dollar (USD), which is holding steady after experiencing losses at the start of the week. Key events on the European economic calendar include the release of Germany's ZEW sentiment index. Later in the day, traders will pay close attention to US data on February Pending Home Sales and the four-week average of ADP Employment Change. The most significant event, however, is the beginning of the Federal Reserve’s two-day policy meeting, with the central bank set to reveal its interest rate decision and updated Summary of Economic Projections (SEP) on Wednesday.

Oil Market Developments

Oil prices experienced a sharp drop on Monday after the United States called for an international coalition to help secure the Strait of Hormuz, which helped ease concerns about supply disruptions. Following a meeting of EU foreign ministers in Brussels to discuss their potential involvement, EU foreign policy chief Kaja Kallas stated that there was little interest in altering the mandate of Operation Aspides, the EU’s naval mission focused on Houthi activity in the Red Sea. She emphasized that the situation was not considered a European conflict and that diplomatic efforts were ongoing regarding the Strait of Hormuz. After tumbling over 4% on Monday, West Texas Intermediate (WTI) crude rebounded, trading near $96 per barrel—up roughly 3% for the day.

Market Sentiment and Currency Movements

Reflecting the cautious mood, US equity futures were recently down between 0.4% and 0.5%, while the USD Index edged up by about 0.1% to 99.90.

Central Bank Updates

In early Asian trading, the Reserve Bank of Australia (RBA) raised its Official Cash Rate (OCR) by 25 basis points to 4.10%, up from 3.85%. The RBA cited concerns that inflation could remain above target for longer than previously expected. During a press conference, RBA Governor Michele Bullock clarified that the decision was not driven by higher oil prices and noted that the future direction of interest rates remains uncertain. The AUD/USD pair remained relatively stable, trading above 0.7050 after the announcement.

Commodities and Major Currency Pairs

• Gold is trading sideways above $5,000, following slight losses on Monday.
• EUR/USD climbed nearly 0.8% on Monday, ending a four-day losing streak. The pair is consolidating around 1.1500 during Tuesday’s European session.
• GBP/USD is struggling to extend Monday’s rebound but remains just above 1.3300 in early European trading.
• USD/JPY slipped by about 0.4% on Monday, briefly touching 159.00 before making a modest recovery on Tuesday morning. Bank of Japan Governor Kazuo Ueda commented that underlying inflation is gradually moving toward the 2% goal and reaffirmed the central bank’s commitment to guiding policy to achieve this target sustainably.