ING’s Francesco Pesole notes that resilient United States (US) equities and higher Oil prices have driven flows away from low-yielding, energy-importer currencies toward the Dollar and commodity FX. However, with US equity futures turning lower, ING warns that US Dollar (USD) could become the sole winner. US S&P Global PMIs (Purchasing Managers' Index) are in focus, with expectations for an improvement in both manufacturing and services.

Risk sentiment and PMIs drive USD

"Strong earnings helped US equities remain resilient yesterday despite signs of re‑escalation in the Gulf. In FX, this translated into a more pronounced rotation away from low‑yielding, energy‑importer currencies and toward high‑beta commodity FX and the dollar. However, US equity futures point to souring risk sentiment overnight, raising the chance that the USD will emerge as the sole winner."

"The reassuring element is that at least one party – the US – is signalling a strong desire to resume negotiations swiftly. What is less reassuring is the lack of clarity around plans for reopening the Strait of Hormuz. The current environment still points to strength in USD and commodity currencies, although the latter depends heavily on a continuation of recent equity market resilience."

"Today, the main macro events in developed markets are the release of S&P Global PMIs. Whilst not as impactful as the ISM for USD, it has better comparability with Europe. The US manufacturing and services gauge is expected to improve from March."

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