US Dollar looks firm, targets 100.00 amid geopolitical tensions
- The US Dollar is gaining extra pace and climbing to multi-month highs.
- The geopolitical factor continues to lend support to the safe haven space.
- US PCE and Q4 GDP data comes next on the US calendar.
The US Dollar (USD) picks up further pace on Thursday, largely exceeding the 99.00 hurdle to hit fresh multi-month tops while nearing the psychological 100.00 hurdle on the US Dollar Index (DXY).
Geopolitics props up the uptick
Indeed, the index has been advancing for the third consecutive day, paving the way for additional short-term gains. Meanwhile, the current flight-to-safety environment, coupled with a rise in US Treasury yields, continues to support the buck.
Returning to geopolitics, the ongoing tensions from the US-Israel-Iran front are driving demand for safe haven assets, where the Greenback continues to outperform its peers.
On the docket, weekly Initial Jobless Claims dropped marginally to 213K in the week ending March 7, falling short of consensus and supporting the Greenback from the domestic side.
Moving forward, inflation measured by the PCE, another revision of the Q4 GDP figures, and the advanced Michigan Consumer Sentiment Index print should set the tone at the end of the week.
What about techs?
Next on the upside for DXY comes the psychological 100.00 barrier. Once this region is cleared, the index might attempt a move toward the November 2025 top at 100.39 (November 21), prior to the May 2025 high at 101.97 (May 12).
On the flip side, the loss of the critical 200-day SMA at 98.34 could pave the way for a deeper decline to the provisional 55-day SMA at 98.05, ahead of the February floor at 96.49 (February 11) and the 2026 bottom at 95.55 (January 27).
(This story was corrected on March 12 at 18:21 GMT to say that Initial Jobless Claims dropped in the week ending March 7, not March 3.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
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