US Dollar drifts higher above 99.00 on Middle East conflict

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.35 during the Asian trading hours on Thursday. The DXY edges higher amid further escalation in the Middle East conflict. The US weekly Initial Jobless Claims report will be published later on Thursday. 

Traders will closely monitor the trouble in and around the Strait of Hormuz. Iran has launched its “most intense operation since the beginning of the war, stepping up its efforts to halt traffic through the critical oil conduit. Meanwhile, Bahrain said early Thursday that Iran has targeted fuel tanks at one of its facilities, while a senior Iraqi port official said two foreign tankers had been hit in its waters, catching fire and leaking oil. Ongoing geopolitical tensions in the Middle East continue to boost the US Dollar against its rivals in the near term. 

The US Consumer Price Index (CPI) rose 0.3% MoM in February versus 0.2% prior, according to the Bureau of Labor Statistics on Wednesday. This figure came in line with expectations. The core CPI, excluding volatile food and energy prices, increased 0.2% MoM in February, compared to 0.3% in the previous reading, also in line with the estimates.

The annual CPI inflation rates were unchanged from January, indicating that inflation was holding above the Federal Reserve’s (Fed) 2% target but not getting worse. Markets are now pricing in nearly a 99.5% chance that the Fed will leave the interest rate unchanged at its March policy meeting, according to the CME FedWatch tool.