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Forex Today: Safe-haven assets remain in demand as Middle East crisis widens

Here is what you need to know on Thursday, March 5:

Financial markets remain risk-averse in the second half of the week as the conflict in the Middle East widens. The US economic calendar will feature mid-tier macroeconomic data releases, while investors will remain focused on geopolitical headlines.

A US submarine sank an Iranian warship off the coast of Sri Lanka on Wednesday and NATO air defense systems shot down an Iranian missile heading toward Turkiye's airspace. Meanwhile, the US Senate rejected a resolution that is designed to force US President Donald Trump to seek congressional approval for further military action against Iran. CNN reported that a top US official said that the US will start attacking deeper into Iran, noting that the operation is still in its early days.

Crude oil prices rise for the fourth consecutive day on Thursday. At the time of press, the barrel of West Texas Intermediate was trading at $77.15, rising about 1.4% on the day.

Following a two-day rally, the US Dollar (USD) Index corrected lower and closed in negative territory on Wednesday. The USD Index regains its traction and fluctuates above 99.00 early Thursday, rising about 0.3% on the day. The data from the US showed on Wednesday that the Institue for Supply Management (ISM) Services Purchasing Managers' Index (PMI) improved to 56.1 in February from 53.8 in January. Additionally, Automatic Data Processing's (ADP) Employment Change for February came in at 63K, surpassing the market expectation of 50K. Later in the day, the US Department of Labor will publish the weekly Initial Jobless Claims data.

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD1.56%0.74%0.85%0.17%0.50%0.79%1.80%
EUR-1.56%-0.82%-0.73%-1.37%-1.04%-0.75%0.24%
GBP-0.74%0.82%-0.10%-0.56%-0.24%0.06%1.06%
JPY-0.85%0.73%0.10%-0.63%-0.28%0.06%0.99%
CAD-0.17%1.37%0.56%0.63%0.31%0.70%1.63%
AUD-0.50%1.04%0.24%0.28%-0.31%0.29%1.30%
NZD-0.79%0.75%-0.06%-0.06%-0.70%-0.29%1.00%
CHF-1.80%-0.24%-1.06%-0.99%-1.63%-1.30%-1.00%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

After suffering large losses on Tuesday, Gold (XAU/USD) found support and registered marginal gains on Wednesday. XAU/USD stays relativley quiet in the European morning on Thursday and fluctuates above $5,150.

EUR/USD snapped a two-day losing streak on Wednesday but failed to preserve its recovery momentum on Thursday. The pair edges lower in the early European session and trades near 1.1600.

GBP/USD turns south on Thursday and declines toward 1.3300, pressured by the renewed USD strength.

USD/JPY rebounds following the bearish action seen in the early Asian session and trades in positive territory above 157.00.

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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