DXY: Range holds as energy dynamics dominate – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes that risk sentiment remains resilient even as US–Iran tensions flare, with Brent Oil easing and the US Dollar Index (DXY) consolidating below its 200‑day average. Haddad argues that, while the United States (US) has a positive energy balance, interest rate differentials should keep DXY anchored in a 96.00–100.00 range as markets watch JOLTS and ISM Services data.

Energy balance and US data guide Dollar

"Risk sentiment is holding firm despite renewed hostilities between the US and Iran. Both sides fired shots in the Strait of Hormuz, threatening the four-week-old ceasefire, while the UAE came under attack from Iran. Brent crude oil prices pared back some of yesterday’s gains, global equity markets are mostly higher, and the dollar index (DXY) is consolidating just under its 200-day moving average (98.57)."

"Until the fog of war clears, energy prices will remain supported and currency performance will continue to largely reflect a country’s net energy balance (production minus consumption)."

"The US has a positive net energy balance, but interest rate differentials between the US and other major economies will keep the dollar index (DXY) anchored near the middle of its nearly one-year 96.00-100.00 range. Rate expectations have moved higher across G10 central banks since the war began on February 28."

"The March JOLTS report is expected to remain consistent with the so-called “low-hire, low-fire” labor market backdrop (3:00pm London, 10:00am New York). Both the hiring and opening rates are drifting lower while the layoffs rate remains low."

"The April ISM services index is seen supporting Fed rate hike expectations (3:00pm London, 10:00am New York). Consensus estimates the headline index at 53.7 vs. 54.0 in March and the prices sub-index at a 73.5 (highest since July 2022) vs. 70.7 in March."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)