The US Dollar fell for a second day, with the Dollar Index near 99.60. It stayed under pressure ahead of the Federal Reserve interest rate decision and after Donald Trump said on Truth Social that US NATO allies do not want to join the US military operation in Iran, naming Japan, Australia and South Korea. The US dollar’s daily performance table showed it was strongest against the Canadian Dollar. EUR/USD traded near 1.1530, while Germany’s ZEW Economic Sentiment for March dropped to -0.5 from 58.3 in February. The ECB is due to meet on Thursday and is expected to keep rates at 2%. GBP/USD traded near 1.3350, with the Bank of England expected to hold rates on Thursday. USD/JPY traded near 159.00. AUD/USD rose above 0.7110 after the RBA raised rates by 25 basis points, with a 5–4 split among its nine members. Oil traded at $96 per barrel, linked to the Strait of Hormuz blockage. Gold traded at $4,996. Key events include, on Wednesday: EUR core HICP (YoY) (Feb), US PPI (Feb), BoC rate decision, US factory orders (MoM) (Jan), Fed rate decision, FOMC projections, and NZ GDP (YoY) (Q4). Thursday brings RBA jobs, BoJ, UK jobs, BoE, SNB, ECB, US jobless claims, Philly Fed, US new home sales (MoM) (Jan), NZ surveys, and NZ trade (YoY) (Feb), followed by PBoC, EUR PPI (YoY) (Feb), and CAD retail sales (MoM) (Jan) on Friday. WTI is a light, sweet US crude benchmark distributed via Cushing. Its price is driven by supply and demand, global growth, geopolitics, OPEC decisions, the US dollar, and inventory reports from API and EIA, which are within 1% of each other 75% of the time. It is important to remember the market environment exactly a year ago, in March 2025. We saw the Dollar Index near 99.60, weakened by active conflict in the Middle East and uncertainty surrounding the Federal Reserve. Today, the DXY is trading with more strength, hovering near 104.50 as the market focuses less on active military threats and more on economic data. Looking back at 2025, we were bracing for a Fed decision amid a brewing war, a situation ripe with volatility. Now, the conversation has shifted from rate hikes to the slow pace of expected rate cuts, especially with the latest core PCE inflation data for January 2026 holding at a stubborn 2.8%. This persistence means options strategies betting on a slower easing cycle than the market currently prices could be advantageous. Oil markets provide a stark contrast, as we see WTI crude trading near $78 a barrel today. This is a significant drop from the $96 level seen during the Strait of Hormuz blockage in 2025. While spot prices are lower, the memory of that supply shock suggests buying long-dated, out-of-the-money call options on oil is a cheap way to hedge against any potential flare-up in regional tensions. We can see the impact of a stronger dollar on currency pairs like the EUR/USD, which is now trading near 1.0850, far below the 1.1530 level from last year. The European Central Bank’s own policy path remains a key variable, creating opportunities in options that play on the rate differential. Similarly, USD/JPY remains elevated around 155.00, reminding us that even with the dollar’s broad strength, the yen’s weakness is a persistent theme. Gold’s price action also tells a story of shifting risks. The metal has settled around $2,450 an ounce, a far more sustainable level than the crisis peak of nearly $5,000 we witnessed in 2025. This shows how quickly war premiums can evaporate, suggesting that derivative positions in gold should be structured around inflation expectations rather than purely geopolitical hedges.

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