ING’s Chris Turner notes the Dollar (USD) remains supported as investors await a White House deadline linked to the US-Iran conflict and elevated energy prices. Strong US jobs data and resilient activity could see markets price Federal Reserve (Fed) hikes if Oil rises further. Turner expects the US Dollar Index (DXY) to hold firm in a defined range while geopolitical uncertainty persists.

Dollar supported by geopolitics and data

"The dollar remains well-supported as investors await tonight's deadline from the White House. Failure of a ceasefire being agreed could prompt heavy US and Israeli bombing of Iranian civilian infrastructure and likely backlash from Iran against equivalent targets on its neighbours in the Gulf. Energy prices could face another major leg higher under this scenario."

"If US activity data continues to hold up, then the market will be more inclined to price in Federal Reserve hikes should energy prices take another leg higher. Fed policy is currently priced flat this year relative to the two to three hikes priced amongst major trading partners. Feeding into the Fed story this week will be Wednesday's release of the minutes to the 18 March FOMC meeting, plus Friday's update on March CPI."

"Consensus expects headline inflation to jump to 3.4% year-on-year from 2.4% prior. Should the market shift to pricing Fed hikes this year, we can only see that as a dollar positive."

"Barring some big surprise drop in the weekly ADP jobs data today, expect the dollar to stay bid. We will also hear from several Fed speakers. New York Fed President John Williams appears on Bloomberg television at 2:30pm CET."

"Expect DXY to remain bid in a 100.00-100.50 range as traders brace for tonight's deadline."

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