ING’s Chris Turner notes that persistent geopolitical risks in the Middle East and elevated energy prices are supporting the Dollar. Turner expects DXY to drift towards the upper end of recent ranges, and highlights the concerns over US private credit.

Geopolitics, energy and credit risks

"Given much uncertainty, we suspect the dollar can edge towards the top of recent ranges today. The market will remain transfixed by European natural gas prices and assuming that these push higher again today, DXY can probably edge back towards the 99.40/50 area."

"Turning back to the US, last night's release of the Fed's Beige Book ahead of the 18 March FOMC meeting gave a picture. Growth seems mixed/subdued, as did the labour market. There was some suggestion that companies could be ready to pass on tariff costs to the consumer, but doubts about whether consumers, especially lower-income consumers, could handle it."

"In addition, we are starting to see more frequent headlines about the US private credit space and, in particular, the redemptions coming from business development company (BDCs). These are investment companies targeted at wealthy retail investors looking for alternative investment strategies. Funds raised are traditionally invested in SMEs."

"Some high-profile BDCs, such as those of Blue Owl and Blackstone, are currently seeing heavy redemptions as investors fear that their funds have been used to fund the AI boom for some of the software companies. Market focus is now on the size of any further redemptions, where BDCs get 'gated' or redemptions halted, and whether the BDCs need to sell illiquid investments to meet redemptions."

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